Goldman Sees China Lowering 2020 Growth Target to ‘Around 6%’
The vague “around” term would allow a growth rate below 6% to still be viewed as compatible with the target, the economists said.
(Bloomberg) -- China is likely to lower its economic growth target for 2020 to “around 6%” which would give policy makers leeway to respond to slower growth while still keeping the goal of doubling income this decade within reach, according to Goldman Sachs Group Inc.
Communist Party officials are expected to convene the annual Central Economic Working Conference this month and trim the growth target from 6%-6.5% this year, economists including Yu Song wrote in a note published Friday.
The vague “around” term would allow a growth rate below 6% to still be viewed as compatible with the target, the economists said. The goals set at the conference are usually kept undisclosed until formally endorsed by the legislature in March.
China’s economy expanded at the slowest rate in almost three decades at 6% last quarter. Economists expect the economy to slow below 6% in the fourth quarter on weak domestic demand and external headwinds.
Beijing will likely be tolerant of higher inflation in the coming year, raising the ceiling to 4% from the current 3%, Goldman Sachs said.
China’s inflation surged to 3.8% in October, the highest since 2012. China’s consumer prices are expected to rise by as much as 5% early next year as pork supply shortage persists, and decelerate in the latter half of the year once pork prices stabilize.
The Chinese government is also expected to allow an uptick in fiscal deficit to 3% from 2.8% this year, according to Goldman Sachs. Amid a slowing economy, Beijing has already rolled out a string of targeted measures including tax cuts which makes the sub-3% target difficult to achieve for this year, the economists wrote.
Monetary targets are likely to be kept unchanged, Goldman Sachs expects.
For overall policy, the economists project it to be a continuation of recent tone.
“The leadership likely wishes to focus on domestic problems amid the trade conflict which is unlikely to be resolved fully next year,” according to Goldman Sachs. Reform measures which are clearly in China’s interests and can also help the trade negotiations will likely be implemented with priority, such as greater opening of the agriculture and services sectors, and more protection of intellectual property rights, the report said.
To contact Bloomberg News staff for this story: Lin Zhu in Beijing at lzhu243@bloomberg.net
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Jiyeun Lee
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