China’s political leadership and the coronavirus – how to handle growth objectives and statistics?

09:43 by Hubert Fromlet, Kalmar

Hur kommer Kinas ledare att tackla coranavirusets negativa tillväxteffekter?

Summary / Sammanfattning på svenska

Det skrivs för närvarande väldigt mycket om de negativa effekterna på Kinas ekonomi p g a coronaviruset. Detta trots att det saknas underlag till mer precisa beräkningar. Effekter från minus 0.5 upp till minus 1.5 procent av BNP nämns såväl för det första kvartalet med åtföljande normalisering som för helåret 2020 – trots den helt omöjliga förutsebarheten. Dock förbises en annan intressant fråga: Hur kommer Kinas politiska ledare att tackla den kommande BNP-statistiken med tanke på det så sent som i januari i år uppsatta BNP-tillväxtmålet för 2020 på “omkring 6 procent”?

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Every day we can read about revised GDP forecasts on China as a consequence of the coronavirus. Economists “introduce” themselves as medical doctors, virologists and experts on both Chinese politics and statistics – many of these economists, however, dealing with China only occasionally. For this reason, readers of these new China forecasts should be very careful and also consider possible psychological overreactions or minimization. I hereby stress the word “possible”. An unknown factor is also Africa with many Chinese working there. Hopefully, negative news from there will not reach us.

Analysts neglect the political strategy conflicts

The coronavirus does not fit at all in the communist party’s economic planning process. First, there is – or should be according to previous plans – the “evaluation” of the 60 relatively detailed reform plans from the Third Plenum in 2013 which should give “significant” results by 2020.

Second, in 2021 the Communist Party of China will celebrate its 100 th anniversary. A major weakening of GDP-growth the year before would certainly not be appreciated by the leaders of the strong Standing Committee and all the other highly ranked party officers.

Third, the next five-year plan will start already in 2021. This means that the underlying growth trend will be even more difficult to find if the coronavirus really should cause structural or sustained psychological damage. And it is certainly not easy to recognize and determine appropriate assumptions and preconditions five years ahead in this critical and not normal year of 2020.

Fourth, considerably slower GDP growth in 2020 could indeed jeopardize the official objective to double GDP in the decade to 2020. It will be a narrow race in any case.

The alternatives

Altogether: Looking at 2020, it appears obvious that President &:Chairman Xi Jinping and the other political top leaders around him actually cannot “afford” a clear weakening of GDP growth. Such a negative development can either be counteracted  by further fiscal or monetary stimuli and/or by “window dressing” of GDP statistics (as critics interpreted surprising upward-revisions of GDP last fall).

It is hard to imagine that China’s political top leaders (in the Standing Committee) will remain passive without influencing GDP in a more positive direction. In my view, trying to remain relatively close to the official growth target will have political priority. But I do not want to give a GDP-growth number for 2020 at this very moment.

Conclusion

Clearly missing the annual growth target and/or the goal of doubling GDP would be negative or even embarrassing for China’s political leaders – unless the coronavirus really would make the situation much more critical. Consequently, keeping GDP growth for 2020 as close as possible to the “around 6-procent target” seems to be the guiding strategy.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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