Despite China lowering GDP target to 7%, meeting it is tough: UBS economist

SINGAPORE - Even as China lowered its economic growth target last week, in line with market expectations, some experts feel that the new 7 per cent target - down from about 7.5 per cent previously - will be a tough one to meet.

"The Government is obviously accepting slower growth," said UBS chief China economist Wang Tao in a media interview on Tuesday.

"But 7 per cent is still relatively ambitious... it's a challenging target to achieve."

Dr Wang expects that weaker consumer sentiment and lower demand in sectors from energy to automobiles will continue to be a drag on China's economy, though exports might "recover somewhat" as the United States and European economies continue on the path to recovery.

The reason why domestic consumption is not booming, said Dr Wang, is that the nation's wage growth has slowed. Last year, migrant wage growth in China fell below 10 per cent growth for the first time in years, she added.

The lacklustre property sector has also dampened consumer sentiment, though new measures to build up social security nets through pension and healthcare insurance reform might prompt consumers to spend rather than save more, said Dr Wang.

UBS's forecast is for China's economy to expand just 6.8 per cent this year.

But Dr Wang is confident that China will deliver on its second commitment - to create 10 million new jobs in urban areas this year.

"The Government always sets an absolute number for job creation," said Dr Wang, which makes it a more solid target than GDP (gross domestic product) growth, which is expressed only as a percentage.

"As the economy grows, slower growth can still generate more jobs. Seven per cent growth in 2015 is still more than 10 per cent growth in 2008 or 2009, and that's enough to keep the job market generally stable," she said.