Lower growth target highly likely next year

China concluded its Central Economic Work Conference on Dec 11. The annual meeting, which brought together major economic policymakers at both central and provincial levels, set the tone for the next year. The meeting provided many crucial clues that reflected mindset changes of top policymakers. It also gave ideas of how policies would be shaped in the coming year.

Among all possibilities, the economic growth target would be lowered for 2015. Most likely, 7 percent will be the goal the world's second largest economy will go for. That will represent a 0.5 percentage point reduction from the previous year.

The lowered target can be reflected by the description of the economic situation in the statement released after the meeting. The statement said the Chinese economy faced the downward pressure that was "quite large". By comparison, last year's statement said "downward pressure existed". The change of the wording showed that top policymakers were convinced of greater challenges ahead.

In addition, the just-concluded Central Economic Work Conference, for the first time, systematically articulates the meaning of "New Norm" theory. "New norm" is a phrase used by President Xi Jinping several times recently, reflecting the leadership's drive to wean the economy from dependence on infrastructure investment and exports. One of the cores of the theory is to let the economy adapt to a slower growth, as top policymakers have expressed many times that the economy cannot maintain its previous high-speed growth.

Therefore, downside revision of the economic target for next year is highly possible.

As for fiscal and monetary policies, the Central Economic Work Conference also provided some hints.

The statement said a "proactive fiscal policy and prudent monetary stance" would be retained in 2015. This ruled out the possibility that massive stimulus was on card.

Although this year's economic growth was not as handsome as it was in the past years, the meeting participants held that major economic and social goals could be met. They also believed the economy was operating within the reasonable range, reforms and opening-up had been deepened, and positive signs had emerged in the economic restructuring. Those expressions meant that top policymakers were not pessimistic about the economic prospects.

But greater flexibility in monetary policy was also pledged at the meeting. The statement said "the proactive fiscal policy must be powerful, and more attention needed to be paid to the appropriate elasticity for the monetary policy". This showed that growth would be the key task next year but that monetary policy can be changed in accordance with economic fluctuations.

The author is a Shanghai-based financial analyst.