China’s high local economic growth targets questioned by political advisors

China’s high local economic growth targets questioned by political advisors

  • Xinhua 

2013-03-05

As developed nations search desperately for faster growth to escape the mire of their troubled economies, more people in China, the world’s second-largest economy, are demanding the opposite.“What we really want is slower but healthier economic growth,” was a common mantra among Chinese national political advisors on the sidelines of the annual session of the country’s top political advisory body, which opened in Beijing on Sunday afternoon.

“The current rapid economic growth is built at the cost of the environment and that model is unsustainable,” said Tang Zilai, a member of the National Committee of the Chinese People’s Political Consultative Conference, the country’s top political advisory body.

Their concerns came after new and ambitious local governments across the country set their 2013 economic growth targets much higher than the 7.5% goal announced by the central government last year.

Of all 31 provinces, autonomous regions and municipalities in the Chinese mainland, 11 local governments, mainly from central and western regions, aimed to increase their local economy by 12% or above, while 13 local governments set their growth targets at 10%.

The provincial government of Guizhou, a mountainous province known for its poverty in southwest China, was most aggressive by aiming for growth between 14% to 16%.

In contrast, the municipal government of Shanghai, China’s financial center and most developed city, eyed only a 7.5% growth this year, the lowest level among local governments.

The provincial government of Guangdong, China’s top economic powerhouse, further scaled down its 2013 growth target to 8% from 8.5% last year.

“The growth targets vary by region,” explained Liu Shucheng, a political advisor from the Chinese Academy of Sciences. “Governments in the relatively underdeveloped central and western regions are eager to catch up with their developed counterparts in eastern and coastal regions.”

Much of the expected growth, however, will come from investment, as 20 out of 31 local governments look to expand their fixed-asset investment by 20% or even 30%, indicating that China still faces an uphill struggle in restructuring the economy to reduce reliance on exports and investment.

The Chinese central government lowered the nation’s 2012 growth target to an eight-year low of 7.5% to give policymakers some leeway to rebalance the economy.

Critics say the lowered target last year was widely interpreted only as a minimum acceptable floor rather than a ceiling.

In reality, Chinese economic growth eased to 7.8% last year — according to official government statistics — amid shrinking external demand and domestic efforts to rebalance the economy, marking the lowest level since 1999.

But that growth rate was high enough to stun other Group of 20 countries, which as a whole reported a mild growth of 2.6% year on year in the third quarter of 2012.

Exiting Chinese premier Wen Jiabao will announce the growth target for the world’s second-largest economy in his last delivery of a government work report to the parliament session, which is slated to open on Tuesday.

An increasing number of Chinese are aware of the downside of rapid economic growth over the past three decades after widespread hazardous smog blanketed most parts of central and eastern China earlier this year.

The toxic weather has affected the lives of hundreds of millions of people in the country and triggered calls for reduced pollution to be prioritized ahead of rapid economic growth.

Lian Jiede, a national political advisor from the Taiwan Democratic Self-Government League, said he expected the central government to come up with goals to stabilize economic growth but improved quality and performance of development is more important.

“We need to strike a balance,” said Lian.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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