Macroeconomic indicators - Overheating fears grow in China

Saturday, 29 Jan 2011

Xinhua reported that some local governments plan on doubling their GDP within five years as China ushers in its 12th Five Year Program (2011-2015) and raising concerns that the Chinese economy could overheat.
As per report, at the starting point of the 12th Five Year Program, local governments have released their GDP targets for the next five years at the annual meeting of the local legislature. Many set double digit growth targets for the coming five years and some even proposed doubling their 2010 GDP by the end of 2015.

A rough calculation shows that to double the GDP in five years an annual growth of 14.87% would be needed. That is even faster than China 10.3% GDP growth in 2010 and 9.2% in 2009.
Southwestern China Chongqing Municipality planned to reach an annual GDP growth rate of 12.5% and double local GDP per capita to USD 8,000 by 2015. Jiangmen city of southern Guangdong province has set its sights even higher. It eyes an average annual GDP growth of 15% much higher than the 8% target for the whole province.
Only a few regions lowered their GDP targets. For example, Shenzhen lowered its growth target to 10 percent from 13.5 percent in the 11th Five Year Program.
The enthusiasm about economic growth figures of local governments has triggered authorities and economists to worry about the economy overheating, and put further pressure on inflation management and economic restructuring.

Mr Zhang Ping, director of the National Development and Reform Commission while addressing the national working conference on energy on January 7 that China's top economic planning body, said most provinces set their 2011-2015 GDP targets too high and failed to take into consideration the constraints of environmental protection, energy and resources.

Mr Yao Jingyuan chief economist of the National Bureau of Statistics said if the economy grows too fast, it would undermine both price stability and economic restructuring. He said that "We should make every endeavor to step on the brake peddle for our economy to maintain a moderate growth rate and avoid overheating of the economy. I personally think a growth rate of 8% to 9% will be great."
The high GDP targets set by local governments also show that the growth patterns adopted by local governments remain unchanged.
(Sourced from Xinhua)