>

Chinese President ready to accept economic growth below 6.5%

The Chinese President Xi Jinping is ready to accept slow of economic growth even below 6.5%, because of rising debt and fears of an uncertain global environment after the election of Donald Trump for president of the United States. During a meeting with a group of the Communist Party, which deals with financial and economic issues, the president said that there is no need to observe the target if it hides too many risks. The representatives of the ruling party attended the talks have agreed that the economy worth 11 trillion USD will be stable even with weaker growth, if employment is stable.

Last year, the authorities in Beijing gambled annual growth of at least 6.5% for the five-year period to 2020 in attempt to fulfill the promise of the party for moderately prosperous society. The aim is the GDP and incomes to rose twice until 2020 in comparison with ten years ago.

Some economists have criticized the target of 6.5% growth because they believe it motivates the authorities to take risks that threaten financial stability. The International Monetary Fund (IMF) is among the institutions that recommend lower target growth rate.

The changes of the attitudes in Beijing shows that the systemic risk for the authorities is large enough to make them reconsider their basic purposes or that they are less likely to introduce fiscal and monetary stimulus.

The meeting between Xi Jinping and representatives of the Communist Party was discussed also the unsustainable debt. Other countries have experienced crises, having incurred debt of around 300% of GDP, but the current ratio in China is 270%.

At another meeting last week, Chinese President and his main economic advisers vowed to prevent the control of financial risks in order to avoid the formation of bubbles in many asset classes. In addition, they plan reasonable and neutral monetary policy, as well as proactive fiscal policy in 2017.

Over the last three quarters, China recorded growth of 6.7%. The annual increase of GDP in 2015 amounted to 6.9% and was the weakest in 25 years.

more recommended stories