BEIJING (BLOOMBERG) - Chinese Premier Li Keqiang highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership's readiness to accept the weakest period of expansion since the economy was opened up three decades ago.
The nation needs annual growth of at least 6.53 per cent in the next five years to meet the government's goal of establishing a "moderately prosperous society," Li said in an Oct 23 speech to Communist Party members, according to people familiar with the matter who asked not to be named as the remarks were not public.
Communist Party leaders will on Thursday (Oct 29) conclude a four-day gathering to discuss their 2016-20 five-year plan for the nation, the first since President Xi Jinping and Premier Li took office.
"It seems that Premier Li is sending a signal through his speech that China's government is likely to lower their growth target to 6.5 per cent in the 13th five-year plan," said Le Xia, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA.
"The 6.5 per cent target is still a little challenging. A target of 5-6 per cent seems a more feasible one."
Private economists have predicted a lowering in the five- year growth target to 6.5 per cent, down from 7 per cent in the current plan - a reflection of the Communist leadership's continuing attempts to move away from debt-fueled expansion.
China's central bank shouldn't adopt quantitative easing to flood the economy with too much money, Li said, according to the people. The comment underscores how the People's Bank of China has opposed US and Japan-style direct purchases of assets in its campaign to ease liquidity and shore up the weakest expansion in a quarter century.
The State Council did not immediately respond to a faxed request for comment on Li's remarks.
Li, speaking to the Communist Party Central Committee's Party School, underscored China's avowal to avoid cheapening the yuan as a tool to stoke exports. Recent depreciation in the currency has been a "market action," he said, according to the account. The program to bolster international use of the yuan will continue to advance, he said.
The premier said that fiscal and financial risks are increasing, and that the stock-market rout suffered earlier this year was caused by leverage, such as a surge in margin financing. Growth cannot return to the days in excess of 10 per cent, though it can stay in a reasonable range, Li said.
Officials have worked hard to achieve the current target of 7 per cent, the premier said. Some private estimates of the economy indicate that the expansion may be weaker than officially reported, as gains among new services and consumer- led businesses aren't yet sufficient to offset a contraction among old-line industries.
"In the next five years if China can grow between 6 per cent and 6.5 percent that will be a very good number," said Liu Li- Gang, the chief Greater China economist at Australia & New Zealand Banking Group Ltd in Hong Kong.
China's goal of a "moderately prosperous society" refers to policy makers' plan to double per-capita income by 2020 from 2010 levels. Li said that the country will lift most of the people currently among the 70 million living in poverty out of that condition by 2020.