World Bank urges China to cut economic growth target to seven percent in 2015, focus on reforms

Wed Oct 29, 2014 4:09am EDT
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By Jake Spring

BEIJING (Reuters) - China can cut its economic growth target to 7 percent next year without hurting its labor market, the World Bank said on Wednesday even as it urged Beijing to get rid of rigid growth objectives.

At its thrice-yearly review of the Chinese economy, the World Bank warned China against carrying its "ambitious" 2014 economic growth target of 7.5 percent into next year, saying that such a move would detract from the government's reform plans.

After 30 years of breakneck, double-digit economic expansion that lifted millions of Chinese from abject poverty but also polluted the nation's air, land and waterways, China wants to retool its economy to generate slower but better-quality growth.

But the quest to let market forces supplant state planning in running the world's second-biggest economy would require China to live with less frenzied economic growth rates and income rises, a point stressed by the World Bank.

"Our policy message is the focus should be on reforms rather than meeting specific growth targets," Karlis Smits, a senior economist at the World Bank office in Beijing, told reporters at a media briefing.

"In our view, an indicative target of around 7 percent for 2015 would meet ... the kind of indicative growth that is needed to maintain stability in the labor market," he said.

The bank's message on employment would appeal to its audience in Beijing, where Communist Party leaders who are wary of social unrest have said that having a healthy job market is a top policy priority.

Hurt by softening domestic demand as China's property market sags and investment growth wanes, the Chinese economy has had a rough ride this year, even though the government and the central bank have rolled out a series of support measures to avert an even sharper slowdown.   Continued...

Workers labour at a construction site in Beijing October 10, 2013. 
 REUTERS/Kim Kyung-Hoon