Since taking power last year, the new leadership in Beijing has insisted that it will place less emphasis on how fast China expands, and put a greater focus on the quality of its economic growth. Xi Jinping, president, and Li Keqiang, premier, have both stressed that China must reduce its addiction to cheap credit, lower its reliance on business investment and pay more attention to the quality of life of its citizens, for example by taking concrete steps to reduce pollution levels.
Yet when these declarations faced their first meaningful test last week, China’s leaders blinked. Last week at the National People’s Congress, the same assembly that 12 months ago elevated Messrs Li and Xi to their current roles, the government announced it would aim for a growth rate of 7.5 per cent this year. This is the same target as in 2013, when the economy expanded by 7.7 per cent.
China’s growth targets are, to some extent, a relic of the past. Over the past decade these have rarely been a real guide to policy, as the economy cruised faster than the leadership had planned. But at a time of slower expansion, these indicators provide useful guidance over China’s direction of travel. Beijing could have opted for a lower target – say, 7 per cent – or a range, which would have given the government greater room to slow down its overheating economy. That the government stuck to an ambitious target means the transition to a more sustainable growth path will have to wait.
The trouble for Beijing is that, in the early part of this year, the economy has already shown signs of weakness. Activity in the manufacturing sector hit a seven-month low in February, according to HSBC’s purchasing managers' index. Trade data paint a less clear-cut picture, with strong export gains in January followed by a contraction last month. However, investors remain sceptical of these indicators, given the growing tendency among Chinese companies to boost their invoices fictitiously as a way to avoid capital controls. Overall, the fear is that the leadership will sooner or later have to stimulate the economy to meet its preordained target, just as it did in the summer of 2013. Already there are signs that the People’s Bank of China has eased monetary policy: money market rates, which jumped in December, have fallen sharply.
Injecting more liquidity into the system would provide breathing space for the large state-owned enterprises and local governments, which are struggling to repay the loans accumulated following the 2009 monetary stimulus. It would also keep social unrest at bay, as businesses would be able to create jobs for the millions of migrants who every year leave the countryside for the cities. Yet a new stimulus would spur the rate of credit growth, which continued to accelerate in January. It would also add to the debt stock, which over the past five years has nearly doubled, climbing from 130 to 210 per cent of national income.
For these reasons, Beijing should hold off on fresh stimulus, even if it means letting its growth target slip. What it should do instead is insist on measures that give the signal that investors will face the consequences of loans going sour. The decision to let solar-panel maker Shanghai Chaori Solar default – the first such instance in recent Chinese history – will help introduce much-needed discipline in a market that has too often enjoyed the luxury of bailouts.
China faces a difficult balancing act between pushing too hard on the brake – which could cause a wave of defaults – and continuing to fuel its credit addiction. But chasing overambitious targets is not the answer. China will eventually have to rebalance its economy towards a more sustainable model. The sooner it starts to turn, the less dangerous the process will be.
由于这些原因，中国领导层应当避免出台新的刺激——即使这意味着达不到增长目标。它应该做的是坚持采取发出“投资者将面临不良贷款后果”这一信号的措施。让太阳能电池板制造商上海超日太阳能(Shanghai Chaori Solar)违约（这是近年中国首例违约）的决定，将有助于在一个过于频繁地坐享纾困的市场引入亟需的纪律。