China to put growth before reform ambitions amid slowdown fear

Tue Oct 13, 2015 2:43am EDT
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By Kevin Yao

BEIJING (Reuters) - Chinese leaders will signal that growth is their priority over reform for the world's second-biggest economy by setting a growth target of around 7 percent in their next long-term plan even as the economy loses momentum, policy insiders say.

The Communist Party's central committee will meet from Oct. 26-29 to set out their 13th Five-Year plan, a blueprint for economic and social development between 2016 and 2020.

While the government has flagged a "new normal" of slower growth as it tries to shift the economy to sustainable, consumption-led growth, official data shows it has consistently at least met, and mostly exceeded, the growth targets it sets.

"We will have to rely on policy stimulus to safeguard the 7 percent growth target," said an economist from a government think-tank. "We should not put financial liberalization at the forefront of economic reforms."

Beijing needs average growth of close to 7 percent over the next five years to hit a previously declared goal of doubling gross domestic product and per capita income by 2020 from 2010.

But a plunging stock market .CSI300 and the unexpected fallout from a modest devaluation of the yuan CNY=CFXS have raised fears among policymakers that an abrupt slowdown in growth could spark systemic risks and destabilize the economy.

"It appears that growth has outweighed the reform agenda, which could stabilize the market for the short term while adding destabilization factors in the medium term," said Zhou Hao, senior economist at Commerzbank in Singapore.


A woman carrying a shopping bag walks underneath lanterns of a restaurant in a shopping district of Beijing, China, September 22, 2015. REUTERS/Kim Kyung-Hoon