Beijing growth target lowered to 7.5%

Beijing's economic growth target for 2014 will be slowed to 7.5 percent from the 8 percent expansion goal in 2013, said Guo Jinlong, Party chief of the municipality, reported by People's Day on Wednesday.

The target for 2014 is "not low" and is in line with an adjusted long-term plan, Guo said, and it aimed at securing employment and stabilizing market expectations.

Analysts said that may set the tone for other cities and provinces as the leadership is seeking a more sustainable and high-quality growth pattern in the sacrifice of high-speed development.

"There is no doubt that some senior policymakers are seriously concerned about the rapid debt build-up over the past five years," said Stephen Green, chief economist in China at Standard Chartered Bank. "Of most concern is corporate leverage in the heavy industrial sector and local government debt."

"The speed of increase and apparent lack of growth dividend have made policymakers cautious about allowing leverage to rise more, although the absolute leverage levels are manageable," he said.

According to Green's calculation, the total debt level, as of the end of 2012, was about 215 percent of GDP, up by 65 percentage points since 2008.

The debt situation will probably result in a tight monetary policy and a drag on growth in the coming years, he added.

Zhu Haibin, chief economist in China at JPMorgan, said that a proper but not too fast growth rate in the next two years will help the country push forward economic reforms and solve the imbalanced structural problems.

"The economy is likely to continually decelerate from 7.6 percent in 2013 to 7.4 percent in 2014, with moderate domestic investment growth," Zhu said.

He said that it would be consistent with the growth target specified in the 12th Five-Year Plan to lower the 2014 growth target to 7 percent from 7.5 percent, the lowest since 2005, with targets for CPI inflation of 3.5 percent and broad money supply growth of 13 percent.

"A slower growth target would send a clear signal to local governments and the market that new leaders care more about the quality and sustainability of growth than about the pace," Zhu said.

chenjia1@chinadaily.com.cn