Full employment to be key objective of annual GDP growth target

Attaining full employment will be the key objective of China's annual economic growth target this year with the government likely to use strong policy tools to boost domestic demand, experts said on Tuesday.

The 2021 growth target will be unusual, just as in the past year, given the new wave of COVID-19 cases and an unprecedented weak economic base of 2020, according to Zhang Liqun, a researcher at the Development Research Center of the State Council.

A relatively faster year-on-year growth is not comparable to the expansion pace of economic output in normal years, making it difficult for policymakers to identify a reasonable GDP expansion rate target, Zhang said at a seminar held by the China Center for International Economic Exchanges, a national think tank, on Tuesday.

A reasonable annual growth target means achieving full employment and boosting domestic demand to a sufficient level, he said.

Policymakers did not set any specific growth rate last year due to the COVID-19 outbreak. This year, they also expect an unusual year, without any specific GDP growth rate being mentioned in the upcoming annual government work report.

Experts, however, are optimistic that China's annual GDP growth rate may be around 8 percent this year. Faster expansion will be seen in retail sales, while moderate growth is expected in fixed-asset investment. There will also be no significant pressure from price increases, said Zhu Baoliang, chief economist at the State Information Center.

"In 2021, we should focus more on the monthly growth rate of GDP to monitor the marginal changes," Zhu said, adding that small firms and local governments may be the fragile areas that need consistent policy support.

The forecast came a day after the National Bureau of Statistics said China achieved a full-year GDP growth rate of 2.3 percent in 2020, on the back of 6.5 percent growth in the fourth quarter, making the country one of the few in the world to witness positive growth for the year.

However, consumption continued to be a weak spot in China's recovery, in line with the 2.5 percent inflation, the lowest level in more than a decade.

Government spending will be the mainstay for boosting domestic demand, especially by fostering infrastructure construction and increasing private investment, said Zhang.

China's potential growth rate, a key factor that was used to set the annual economic growth rate target before, is nearing 6 percent this year, according to Zhu's estimates. The COVID-19 effect will have a minor influence on this indicator, which is mainly determined by production factors, productivity growth, resource capacity and the environment.

Estimates from policymaking departments and economists have shown little divergence regarding China's potential growth rate in recent years, and they agreed on the basic trend of leaning toward a gradual decrease on a yearly basis due to the aging population and rising labor costs.

Wang Yiming, vice-chairman of the China Center for International Economic Exchanges and former deputy head of the Development Research Center of the State Council, said maintaining stable employment should be the main task for policymakers to ensure sustainable economic recovery this year.

Fiscal and monetary policy measures need to be supportive of the macroeconomy's status, leaving sufficient transitional periods before policies return to a normal stance. The central bank's special facility to support small and micro enterprises' credit loans should be further extended and ensure there are multiple channels for augmenting the capital requirements of banks, said Wang.

The People's Bank of China, the central bank, warned about the uncertainties related to COVID-19 and the external environment, during a news conference on Friday.

Central bank officials pledged no major policy deviations, strict control over the property sector, continued efforts to lower financing costs and ensuring more funds for high-tech manufacturing, analysts said.

With a resurgence of lockdowns and travel bans due to new coronavirus cases, economists expect the PBOC to slow its "policy normalization".

Experts also expect the central bank to maintain a relatively stable yuan exchange rate and encourage two-way fluctuations of the same around a reasonable equilibrium level that is in line with the country's trade and economic fundamentals.