|Commercial and residential buildings in the Luohu district of Shenzhen, China. (Bloomberg)|
China estimates that growth slowed to 7.6 percent this year, with mounting challenges putting pressure on the nation’s traditional growth model of investment-led spending, according to the official Xinhua News Agency.
The calculation for the gain in gross domestic product for 2013 was included in a report by the State Council, or cabinet, to the legislature, and compares with a government target of 7.5 percent, Xinhua reported Wednesday. A 7.6 percent pace would mark a third straight annual drop in the expansion rate.
“We cannot deny a downward pressure on economic growth,” Xu Shaoshi, minister in charge of the National Development and Reform Commission, told legislators in a briefing on the report, Xinhua said. The State Council document listed among the looming challenges a worsening in pollution and social conflicts. Xu said the nation’s traditional growth pattern is challenged by rising labor and environmental costs, according to Xinhua.
Twenty-seven Chinese provinces and cities raised the minimum wage in 2013 by an average of 17 percent, Xinhua reported Thursday, citing Yin Weimin, minister of human resources and social security.
The GDP release came as China’s central bank sought to ease a liquidity crunch in the market for loans between banks, as financial markets were roiled by the second spike in borrowing costs this year. The People’s Bank of China two days ago conducted its first reverse-repurchase operation in three weeks, stepping up efforts to provide lenders with cash after the biggest surge in rates since 2011 sparked a sell-off in Chinese shares traded in Shanghai, Hong Kong and New York.
The Shanghai Composite Index fell 1.1 percent to 2,082 at 12 p.m. Thursday, after slumping 5.1 percent last week.
A report by the Chinese Academy of Social Sciences said the central bank shouldn’t overly tighten monetary policy for 2014 and suggested that money supply grow at 14 percent for 2014 from the target of 13 percent in 2013, according to a story in Shanghai Securities News Thursday.
President Xi Jinping’s government is attempting to strengthen the role of the private sector and domestic demand in an economy that’s been propelled by debt-fueled public investment in recent years. Xinhua reported that the service sector contributed 44.6 percent of GDP in 2012, up from 43.2 percent in 2010 and compared with a 2015 target of 47 percent.
China’s education budget in 2012 accounted for more than 4 percent of GDP for the first time, Xinhua also reported. The estimate for 2013 growth was given in a mid-term evaluation report on the implementation of the 12th five-year plan, Xinhua said.
China’s GDP reversed a two-quarter growth slowdown in the July-September period, as Premier Li Keqiang spurred factory output and investment in the world’s second-largest economy to meet the expansion target. Analysts surveyed by Bloomberg News this month see growth slowing to a 24-year low of 7.4 percent next year from 7.6 percent in 2013, based on median estimates, as leaders seek to de-emphasize expansion at any cost.
There are uncertainties in the global economic recovery and the international market has failed to produce strong demand, Xu said, according to Xinhua. Challenges also include increasing risks in local government debt and overcapacity, Xinhua reported.
China will further enhance interest-rate flexibility and coordinate fiscal, monetary, industrial, land-use and environmental policies to avoid big economic fluctuations, Xinhua said, citing the State Council report.
Officials set the growth target for 2014 at about 7.5 percent, Caixin reported Dec. 16, citing a conclusion reached at the annual central economic work conference that ended Dec. 13. (Bloomberg)