As China’s annual National People’s Congress draws to a close, its most substantive portions came from Wen Jiabao’s work report, a sort of Chinese version of the “state of the union.” It set the tenor for economic objectives in 2012 — Wen’s final year in office — including a call for slower growth. Wen set a target of 7.5% GDP growth. That would be the first time annual GDP growth dropped below 8% in years. Still, China has tended to overshoot its GDP targets, so the target-setting exercise does not necessarily reflect underlying economic performance. Instead, the target serves as a political signal to remind each level of government that the days of GDP-worship need to end, and that they will have to make way for the long-delayed restructuring.
This is not merely sloganeering, as the government realises that rebalancing the economy necessarily entails a higher tolerance for reduced growth. It is important to understand the context in which Beijing decided to lower the target. As I wrote recently in the China-US Focus:
The central priority for the Chinese government is no longer simply about economic growth. Rather, the chief challenge is dealing with the sociopolitical tensions and inequalities that are products of that growth. On these two fronts, the Wen administration record has been far less than stellar. Moreover, facing the unprecedented ferocity of public opinion, the government is increasingly having its feet held to the fire on issues of social equality and quality of life…
… After 35 years of breathless expansion of the economy, the growth story is less compelling for the Chinese public. Growth alone is no longer the panacea that papers over structural problems or ensures political legitimacy of the regime.
Why? Because the Chinese public, particularly the rising middle class, has started to notice that for all the talk of the Chinese economic miracle, they have not miraculously grown wealthy.
Read the rest of the story at The Atlantic >
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