China's lower target signals policy shift

China faces a cooling housing market and the impact of government efforts at structural reforms could weigh on near-term growth. It will lower its economic growth target this year to around 6.5 per cent
China faces a cooling housing market and the impact of government efforts at structural reforms could weigh on near-term growth. It will lower its economic growth target this year to around 6.5 per centPHOTO: BLOOMBERG

China's economy grew a faster- than-expected 6.8 per cent in the fourth quarter, boosted by higher government spending and record bank lending.

This year, it faces a cooling housing market and the impact of government efforts at structural reforms that could weigh on near- term growth. Globally, threats of tariffs from the US, doubts on Japan's economic recovery and Brexit are casting a shadow.

China will lower its 2017 economic growth target to around 6.5 per cent from last year's 6.7 per cent, reinforcing a policy shift from supporting growth to pushing reforms to contain debt and housing risks.

Even if inflation hits 3 per cent in some months this year, the central bank would have to assess whether the economy is on a solid footing before raising interest rates, which may help the struggling yuan.

FocusEconomics analyst Ricard Torne says the economy will grow 6.4 per cent this year, and will slow to 6.1 per cent next year. Inflation will average 2.2 per cent this year.

Rupali Karekar

A version of this article appeared in the print edition of The Straits Times on January 31, 2017, with the headline 'China's lower target signals policy shift'. Print Edition | Subscribe