PEKIN, October 29- An economic growth target of about seven percent, down from 7.5 percent this year, would be appropriate for China in 2015, the World Bank said Wednesday as expansion slows in the world’s second largest economy.
China enjoyed decades of decades of double digit increases, but its leaders have repeatedly pledged to transform its growth model to a more sustainable one driven by consumer spending rather than state led investment.
Nonetheless authorities in March set this year’s target — which is normally exceeded — at about 7.5 percent, the same objective as for 2013, when gross domestic product (GDP) grew 7.7 percent.
“In our view, an indicative target of around seven percent for 2015 is needed to maintain stability in the labour market,” Karlis Smits, Beijing based senior economist for the bank, told reporters as the institution released its China Economic Update report.
The document also cast doubt on the use of growth targets, saying that emphasis on short-term expansion goals “will make it more challenging to implement the policies necessary to shift growth to a more sustainable medium term path”.
“The policy focus should be on reforms rather than on meeting specific growth targets,” Smits said.
Market forces were playing a bigger role in China, he added, saying: “Conducting an economic policy by setting a growth target per se would kind of undermine this transition towards a new growth model.”
Chinese authorities have ample policy tools “to meet an ambitious target for the next year” if they choose to do so, he made clear.
“However, we think that these buffers should be saved for the future as a safety net in case something else happens”, he added, such as any unexpected “external shocks”.
China’s GDP expanded 7.3 percent in the third quarter this year and 7.4 percent for the first nine months.
Growth will slow to 7.4 percent this year, 7.2 percent next year and 7.1 percent in 2016, the World Bank said in the economic update, “reflecting intensified policy efforts to address financial vulnerabilities and structural constraints and to make growth more sustainable”.