BOFIT Viikkokatsaus / BOFIT Weekly 2018/10

In his opening address to the 3,000 delegates at National People's Congress (NPC) on Monday (Mar. 5), premier Li Keqiang laid out this year's growth targets. He said the country would seek GDP growth of "about 6.5 %" and the same inflation ceiling as last year, i.e. 3 %. Unlike earlier, no targets were announced for growth in the money supply or credit stock. New goals included the creation of 11 million jobs in cities and reducing the number of rural poor by 10 million.

Economists have long wished that China would abandon numeric GDP targets, because such targets in China's current situation leads to distortionary economic policies. Even so, China continues to adhere doggedly to its goal of doubling 2010 GDP by 2020, a goal that requires growth above 6 % p.a. over the next three years. The pursuit of this goal will likely exacerbate difficult debt issues and increase risk to the stability of the financial system.

For the first time ever, China has set an unemployment target based on surveys of urban areas. This year's target level is less than 5.5 % for this survey-based unemployment rate, which includes, among other things, migrant workers. The National Bureau of Statistics has published a survey-based unemployment rate for 31 cities since 2016. The rate has remained steadily in the range of 4.8–5.1 %. The NBS also compiles a survey-based nationwide unemployment figure, but that figure is only released sporadically. A comprehensive unemployment figure will be important for setting policy if officials want to reduce their reliance on GDP targets.

The NPC meeting will adjourn in the latter half of this month. Several major appointments and constitutional amendment are expected, including an end to presidential term limits.