China's 2014 growth in focus as leaders meet on reform plans

Trucks are driven into Shanghai's free trade zone. Economists expect priorities at this year's key economic meeting of China's policymakers to include preparations for freeing up bank deposit rates and experimenting with greater yuan convertibil
Trucks are driven into Shanghai's free trade zone. Economists expect priorities at this year's key economic meeting of China's policymakers to include preparations for freeing up bank deposit rates and experimenting with greater yuan convertibility in a new free-trade zone in Shanghai. -- PHOTO: AP

BEIJING (REUTERS) - China's leaders began mapping out their economic and reform plans for 2014 behind closed doors on Tuesday, drawing confidence from data showing the Chinese economy has sustained momentum from a mid-year pick-up into the final quarter.

Even as the government's 7.5 per cent growth target for this year looks increasingly secure, some advisers think it may not issue a specific target for 2014 in order to have more room to pursue reforms intended to lead to more sustainable growth.

The government has repeatedly said it has the appetite to overhaul the world's second-largest economy, and last month outlined an ambitious agenda for the next decade, but it has also shown a distaste for growth slowing towards 7 per cent.

Top government think tanks, which make policy proposals, were still debating whether the growth target should be cut to 7 per cent next year from this year's 7.5 per cent as the leadership convened in Beijing for the Central Economic Work Conference.

Mr Zhao Xijun, deputy head of the Finance and Securities Institute at Renmin University in Beijing, said he had proposed to the government that it set a range of 7 per cent to 7.5 per cent, but saw an outside chance that Beijing simply scrapped the target.

"It's even better not to announce a target. Otherwise, you strengthen the importance of GDP (gross domestic product)," Mr Zhao said, adding that the government could simply stress economic stability for next year.

The annual conference brings together top party leaders, ministers and provincial officials to set economic targets for the year ahead, which will be unveiled in Parliament next March, according to government economists familiar with the meetings.

High on the agenda this year is a detailed reform plan for 2014 after the Communist Party last month unveiled sweeping economic and social changes, including relaxing the country's one-child policy and liberalising financial markets.

Economists expect priorities to include preparations for freeing up bank deposit rates and experimenting with greater yuan convertibility in a new free-trade zone in Shanghai.

Already this week, new standards have been issued for local officials. Their performance will no longer be based simply on their region's growth rate, but will include resource and environmental costs, debt levels and work safety.

Promotions will also depend on how officials boost technological innovation, employment, household incomes and social security, the central organisation department said.

The overall intention is to restructure China's economy so it is driven by consumption and services, as is the case in Western economies, rather than by exports and investment.

The push for reform means growth will be slower - something leaders have said they are comfortable with as it will lead to more sustainable growth.

But as a protracted slowdown extended into the first half of the year and analysts questioned whether the growth target would be missed, the government stepped in to shore up activity. That saw growth pick up in the third quarter, and many analysts had expected that to taper into year-end. However, data on Tuesday showed retail sales, industrial output and investment maintaining their annual growth rates last month.

That followed figures showing a strong jump in exports and a run of surveys of factory and service sector activity suggesting the pick-up since mid-year has been sustained.

"The economy is humming along, and there is no need for growth upgrades or growth downgrades. They can focus on what they need to focus on, with no need to worry about growth stabilisation policies," said Mr Tim Condon, Asia economist at ING in Singapore.