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Beijing’s goal of 5% growth achieveable for this year

Tan KW
Publish date: Tue, 18 Jun 2024, 08:22 AM
Tan KW
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Beijing: The annual growth target of around 5% is a feasible goal, as China has the potential to take on more debt to boost economic growth while not inflicting inflation, a senior economist says.

Yao Yang, director of the China Center for Economic Research at Peking University, said in an exclusive interview with China Daily his calculations show that China’s potential economic growth rate is currently about 5% to 5.5%.

Potential economic growth refers to the maximum rate at which the economy can expand without causing inflationary pressures, assuming full employment of resources.

With the actual growth rate not currently exceeding the potential growth rate, China therefore can boost the growth rate through taking on more debt, without worrying about inflation, Yao said.

His comments came as China is set to release key economic data.

Data from the National Bureau of Statistics showed that the country’s consumer price index, a main gauge of inflation, rose 0.3% year-on-year (y-o-y) in May, a rise on par with that in April.

The producer price index, which gauges factory-gate prices, dropped 1.4% y-o-y in May, narrowing from a 2.5% decline in April.

“The Chinese government probably needs to take a bigger step to boost demand,” he said, adding that the current bottlenecks to economic growth are mainly on the demand side, not the supply side.

In order to boost demand, consumption, which depends on people’s expectations for future income, is just one aspect. The country needs to drive demand through increasing government spending, said Yao, who is also executive dean of the Institute of South-South Cooperation and Development at Peking University.

The Chinese government has done a lot to boost government spending, particularly government investment, and more work can be done, he said.

China has announced plans to issue ultralong-term special treasury bonds for several consecutive years starting this year.

The issuance of one trillion yuan in ultralong-term special sovereign bonds for this year began last month and will run until mid-November.

In addition, the issuance of one trillion yuan of special treasury bonds was completed during the fourth quarter of last year.

Apart from such special sovereign bonds, Yao suggested that the country explore ways for local governments to raise debt in a regulated way, therefore expanding government investment and boosting demand.

He said it is good that the country has stepped up efforts to curb the commercial debt of local governments, which is borrowed through local-government financing platforms on financial markets and has problems such as lack of transparency and effective supervision and monitoring.

 - China Daily

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