Business / Economy

Focus shifts from growth to quality

(China Daily) Updated: 2014-03-05 09:04

How fast the Chinese economy grows should no longer be regarded as a barometer of its health.

Chinese Premier Li Keqiang will set the GDP growth target for the economy when he delivers the Government Work Report at the 12th National People's Congress on Wednesday.

Experts: GDP growth target reasonable

Nation to intensify reform drive

Many expect this will be set at 7.5 percent - as it was last year - but if it happened to be 7 percent instead, there might not be a negative reaction from the markets, as might have been the case in the past.

China may still contribute 30 percent to global GDP growth, but what is increasingly more important is the quality of that growth.

Many now agree that China's growth model - which has served the country well over the past 30 years but has been so reliant on investment, particularly in infrastructure - has a limited future.

It has perhaps been made more limited by the hangover from the unprecedented 4 trillion yuan ($651 billion) injection into the economy to ameliorate the collapse in global demand for Chinese goods in the wake of the financial crisis in 2009.

This move - while a lifeline at the time - has led to significant imbalances in the economy, leading to excessive local government debt and an overbloated banking system.

It is clear the government fully recognizes the need for reform.

At the Third Plenum meeting in November, the government outlined measures that, if implemented successfully, could lead to a significant rebalancing of the economy.

This included proposed State-owned enterprise reform and steps toward interest-rate liberalization so that capital can be more efficiently priced and allocated within the economy.

Growth remains a sensitive issue. The government embarked on a so-called mini-stimulus, a series of targeted investments, which eased nerves about growth slipping in the middle of last year, but it might not be able to keep doing this.

China may still be a long way from the "roads to nowhere" spending that precipitated Japan's crash in the late 1980s, but its room to maneuver is becoming more restricted.