May 22, 2020

China abandons GDP growth target


All it took was a once-in-a-century global pandemic and economic crisis.

  • The Chinese government finally dropped its annual GDP growth target, long the foundation for economic policy.

Premier Li Keqiang announced the change in his Government Work Report delivered this morning:

  • “I would like to point out that we have not set a specific target for economic growth this year.”
  •  “This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the covid-19 [sic] pandemic and the world economic and trade environment.”
This does not mean that the government will not pursue economic growth:
  • “We must be clear that efforts to stabilize employment, ensure living standards, eliminate poverty, and prevent and defuse risks must be underpinned by economic growth; so ensuring stable economic performance is of crucial significance.”

Get smart: Reformers have advocated for dropping the GDP growth target for years, but have always been rebuffed – until now.

Why it matters: The obsession with growth led to misallocated capital and unproductive investment as officials throughout the system sought to juice GDP above all else. Jettisoning the growth target allows for more sustainable economic growth.

The bottom line: Growth this year will be weaker than many expected.

read more  政府工作报告(文字实录)

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