Chinese government aims for slower growth
After helping to trigger a global stock sell-off last week, China dropped another sour note on investors Monday: Government officials said they were targeting significantly lower economic growth this year than in 2006.
Although many analysts question whether Beijing can reduce economic growth to the target of 8% this year from the torrid 10.7% pace of last year, the announcement -- made at the opening session of China’s parliament -- nonetheless added to investor concerns that dragged down markets throughout Asia and Europe on Monday.
The Shanghai composite stock index fell 1.6%, and losses were heavier in other markets throughout the region.
Japan’s Nikkei-225 stock index slid 3.3%, the South Korean market dropped 2.7% and the Hong Kong market fell 4%.
Other factors also spurred selling in Asian markets Monday, but the lower growth projection for China, which has been a locomotive of the global economy, would have had a “negative impact on investors’ psyche,” said Kirby Daley, a strategist at brokerage Fimat in Tokyo.
A target growth rate of 8% for China “is really quite low,” said Ruth Stroppiana, an analyst at Moody’s Economy.com in Australia, which has been a huge beneficiary of China’s hunger for raw materials.
China’s economic expansion last year was the fastest in a decade, but Beijing wants to slow growth to a more sustainable pace. The government worries that China’s economy is unbalanced, with an overreliance on exports and property investments that are harming the environment and soaking up too many resources.
But many analysts don’t believe that Beijing can -- or wants to -- curtail growth significantly. Chinese officials are keenly aware that they must create jobs for millions of low-income people living in the countryside.
Even with tighter measures to control capital flows, the government has struggled to rein in excessive lending and investment in many regions that have long operated independently. That’s why, Chinese analysts say, fears of a Beijing-engineered slowdown may be overwrought.
“Don’t you remember that Wen Jiabao said the same thing last year?” said economist Zuo Xiaolei in Beijing, referring to similar statements made by the Chinese premier a year ago.
“If the premier said 8%, you should expect 10% by the end of the year,” Zuo said.
