Feb 28th 2011, 17:49 by R.A. | WASHINGTON
THIS morning brings news of a seemingly big change in Beijing:
China's premier said the government wants slower economic growth to avoid inflation and to restructure the economy, even as much of the developed world is struggling to accelerate expansion.
Premier Wen Jiabao said the government's official target for average gross domestic product growth over the next five years will be 7% annually...
My, that could dramatically reshape views of the prospects for global rebal...
...down from a target of 7.5% in the past half decade.
Ah, there's the rub. Given that Beijing was perfectly happy to let scorching, double-digit growth occur despite the 7.5% target, it's not clear whether any real shift is in the offing. As the chart at right shows, actual growth has routinely overshot the target in recent decades, and a decline in the government's goal needn't correspond with a drop in growth rates.
Chinese officials aren't shy about acknowledging this:
Chinese economists cautioned the 7% goal shouldn't be taken literally, but as a signal to the world and to provincial authorities that the government is serious about shifting the drivers of growth toward domestic consumption.
Obviously, there are more meaningful metrics available. The dollar exchange rate is one. Inflation is another. One could even follow actual growth to see what growth rates the government is interested in pursuing. I don't doubt that China's leaders are interested in rebalancing the economy and cutting inflation, and I suspect that they might not mind a slightly slower rate of growth if that reduced the potential for instability. But however enlightened China's officials are, their actions are constrained by domestic interests. And it will take more than a target change to build an internal consensus in favour of slower growth.
In this blog, our correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts.
Advertisement
Over the past five days
Over the past seven days
Advertisement
Subscribe to The Economist's free e-mail newsletters and alerts.
Subscribe to The Economist's latest article postings on Twitter
See a selection of The Economist's articles, events, topical videos and debates on Facebook.
Advertisement
Readers' comments
The Economist welcomes your views. Please stay on topic and be respectful of other readers. Review our comments policy.
Sort:
I think I speak for the entire Western world on this; that's a problem we'd love to have.
They want to slow economic growth? Dude, they must be doing well. (Yes, I know about inflation)
If China doubles the size of its production within ten yrs as will happen at current rates, it will have to expand domestic production, since who else will consume these goods. The US is already consuming more than it can afford. Other Asian countries will grow to an extent, but still it will need to consume a lot more itself. This is a reflection of greater Chinese wealth. If China is clever about it, it will ensure internal consumption growth is driven largely by internal production rather than imports so how much the US will benefit from this shift is open to question.
Also, the US issue with China about exporting too much is really an issue the US has with interests well beyond China. Remember the large investments in China from Japan, Korea, Taiwan...(and also US and European companies). If China were to increase its exchange rate countries that have companies with large sections of their supply chains in China would suffer. These Asian countries would likely also resist US attempts to get China to increase its exchange rates. No wonder the US has not had much influence on China's exchange rate policy. It will be interesting to see how the Republican Economic Nationalists deal with this question if they gain power in Washington over the coming years. I bet not very successfully. But the more aggressive they are the more damage they will cause all round.
Just goes to show you that for all this talk of China as a monolithic dictatorship, provincial Party members are essentially thumbing their noses at comrade Wen and urging the local bank branches to shovel more dough into SOE and their construction company subsidiaries.