China should set around 5% GDP goal for 2021-2025: think tank economist

Construction site of a residential compound in Beijing
FILE PHOTO: Workers are seen on scaffoldings at a construction site of a residential compound in Beijing, China October 19, 2020. REUTERS/Tingshu Wang

November 17, 2020

(Reuters) – China should set an average annual economic growth target of around 5% for the 2021-2025 period, a senior economist at a top government think tank said on Tuesday, in line with a Reuters report.

China’s potential growth rate should be 5-6% during the 14th five-year plan (2021-2025) period, but the authorities should consider rising economic volatility from the COVID-19 pandemic, Li Xuesong, deputy director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences (CASS), told a news briefing in Beijing.

“We suggest that China should set an average annual growth target of around 5%, which is appropriate,” Li said.

China’s economy could grow 2-3% this year and growth could rebound in 2021 to a “relatively high level” but slow again the following year, Li said.

Policy sources told Reuters earlier in November that Beijing was close to setting an average annual economic growth target of around 5% for the next five years.

Zhang Xiaojing, head of the institute of finance and banking at the CASS, estimated that China’s macro leverage ratio – the ratio of total debt to gross domestic product (GDP) – jumped 27.7 percentage points in the first nine months of this year to 270%.

The debt level could increase by about 30 percentage points in 2020, but it could rise by 5-6 percentage points a year in the next five years due to the economic recovery, Zhang told the same briefing.

China’s central bank has said it expected the macro leverage ratio to gradually return to a reasonable level, after allowing the debt level to climb due to economic stimulus.

(Reporting by Kevin Yao; Writing by Se Young Lee; Editing by Tom Hogue and Jacqueline Wong)