March, 09 2017 by lsr team

Beijing will accept lower growth in 2018

Xi Jinping promised in November 2015, that the economy would grow at 6.5% through to 2020. This was necessary, he said, to fulfill a promise by his predecessor, Hu Jintao, to double the 2010 GDP and per capita income by the end of the decade. However, over the past year, there have been several signs that Xi might be willing to back away from this pledge. After recent conversations in Beijing, we believe:
• Policymakers will accept growth below 6.5% from next year. 
• The change responds to a wide-scale recognition that the current rapid pace of debt accumulation is unsustainable and increasingly risky. 
• This bold political move will be enabled by Xi Jinping’s consolidation of power at the 19th Party Congress at the end of 2017. 
• The move is positive for financial stability in China, but should not be mistaken for liberalizing reform.