China Lowers Growth Target as Wen Calls for Sustainability

Wen Jiabao, China's prime minister
Wen Jiabao, China's prime minister. Photographer: Pankaj Nangia/Bloomberg

Chinese Premier Wen Jiabao said the nation set a lower growth target for the period from 2011 through 2015 than in the previous five years as part of efforts to create a more sustainable economy.

The government set an economic growth target of 7 percent for the so-called 12th five-year plan period, which covers 2011 through 2015, Wen said in response to online questions today on the website of the official Xinhua News Agency. China’s target was 7.5 percent for the period from 2006 through last year, with actual growth exceeding that each year.

“We want to put the emphasis of our work on the quality and the benefits of economic growth,” Wen said. “We want the fruits of development to benefit the people.”

China has introduced initiatives to increase domestic consumption, make growth more energy efficient and encourage investment in poorer inland provinces after the economy more than doubled in the past five years as the wealth divide widened, pollution increased and gains in food and home prices accelerated. China can’t “blindly” pursue economic growth that is unsustainable, Wen said today.

The lower growth target is a signal “the government will probably be more aggressive towards controlling inflation,” said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB. “China is also increasingly serious about protecting the environment.”

Economic Growth

China’s economy surpassed Japan’s to become the world’s second largest last year as the nation posted annual growth of 10.3 percent and expansion at a 9.8 percent pace in the fourth quarter. The Chinese economy passed Germany’s in 2007 and those of the U.K. and France in 2005.

During that period, China also became the world’s biggest energy user and the largest emitter of greenhouse gases. A leak of acid-laced water into the Ting River in Fujian province from a Zijin Mining Group Co. mine in July killed enough fish to feed 72,000 residents for a year. Lead fumes from a battery factory poisoned more than 200 children in Anhui province, 23 of which were hospitalized, Xinhua reported in January.

“We can no longer sacrifice the environment in return for fast economic growth,” Wen said in the online discussion today, ahead of the annual plenary meeting of China’s National People’s Congress in Beijing.

Inflation Control

Wen also pledged to curb consumer price increases by controlling liquidity, boosting agricultural production, facilitating transportation of agricultural goods and punishing hoarding and price manipulation. Inflation in China, home to 150 million people living on less than $1 a day, accelerated to 4.9 percent in January from 4.6 percent in December as prices excluding food rose the most in at least six years.

The nation has sufficient foreign currency and grain reserves to curb inflation, Wen said. Credit Agricole’s Kowalczyk said that may mean China will increase imports of grain and other foodstuffs to counter price gains.

“The government is going to pay more attention to sustainable growth, the environment and better distribution of income rather than the pure pursuit of growth,” said Kevin Lai, a Hong Kong-based economist at Daiwa Capital Markets.

China will also continue efforts to curb speculation in the property market and will use legal and economic measures against hoarding of land, Wen said. Home prices in January rose in 68 of the 70 Chinese cities tracked by the statistics bureau, defying measures such as higher down payment restrictions and limits on property purchases issued by the government to curb increases. Wen said today the measures are becoming more effective and he’s confident of controlling property prices.

In addition, the government is also discussing changes to the nation’s system for income tax deductions that will help medium- and low-income individuals, Wen said.

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