Business | Markets
China risks missing 8% growth target
Country needs strong policy-making and packages to prevent a steeper decline, says central bank chief.
- Bloomberg
- Published: 23:31 January 12, 2009
Beijing: Chna's economic growth may fall short of the government's 8 per cent target for creating jobs and preventing social unrest in the world's most populous nation, two top officials said on Monday.
Meeting the target will be "exceptionally arduous," Liu Mingkang, the chairman of the China Banking Regulatory Commission, said in Beijing. There are downside risks to the goal, central bank governor Zhou Xiaochuan said separately in Basel, Switzerland.
Premier Wen Jiabao pledged to announce extra stimulus measures before the legislature meets in March, to add to a 4 trillion yuan ($585 billion, Dh2.147 trillion) growth package. Waning export demand has led to protests by fired employees, an exodus of 600,000 migrant workers from the manufacturing hub of Guangdong, and an estimated urban unemployment rate of more than 9 per cent.
"It's the first official acknowledgement that even the modest 8 per cent growth target may not be achievable in 2009," said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. "The flip side is that we are likely to see a more aggressive policy response in coming months."
China's growth may slow to 5 per cent this year, less than half of the 11.9 per cent expansion in 2007, according to Royal Bank of Scotland Plc. That would be the weakest pace since 1990 and the aftermath of the Tiananmen Square crackdown. The slowdown so far has been moderate compared with other countries and China needs "strong policy making and policy packages" to prevent a steeper decline, Zhou said in Basel, where he's attending a meeting of the Bank for International Settlements.
While 'most people' view 8 per cent as a reasonable goal, it's difficult to make predictions in a time of crisis, the central banker said.
"The downside risk to the Chinese economy is even worse than anticipated," banking regulator Liu said. A transcript of his speech was obtained by Bloomberg News. Liu said last month that an expansion of 7 per cent or less could trigger social instability.
Exports fell for the first time in seven years in November, imports plunged and industrial output gained the least in almost a decade. The state-backed Chinese Academy of Social Sciences forecast 9.4 per cent urban unemployment by the end of 2008, to rise in 2009 as exports and production cooled. China may face unrest this year because of a shortage of jobs for migrant workers and university graduates, The Outlook (Liaowang) Magazine, issued by the official Xinhua News Agency, reported last week. "Mass incidents" may spike, it said, using Communist Party code for riots and civil disorder.
China's cabinet on January 7 announced measures to help graduates find jobs as unemployment rises.
"Ensuring university graduates find jobs is the top employment priority in the light of the severe jobs situation due to the global economic crisis," the State Council after a meeting chaired by Wen.
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