Chinese government set its annual economic growth rate at 7 percent at the beginning of 2015 and half a year later the target was fulfilled.
Is this coincidence too perfect? Some international media have voiced their suspicions.
However, those critics seem to ignore a fact: The method that Chinese government uses to set the gross domestic product (GDP) growth target has become more and more reasonable.
In the Report on the Work of the Government (2013), it first indicated that “economic growth should be co-ordinated with potential growth rate, adapted to the supply capacity of production factors and capacity of resources and environment.”
That means the factors used to set the economic growth rate target are mainly based on the potential growth rate, which is determined by production factors, productivity growth and the capacity of resources and the environment.
What is the Chinese economic growth rate? Although estimates from policy-making departments and economists showed little divergence, a majority prediction is about 7 percent with the trend leaning towards a gradual decrease year on year.
China’s economic growth declined from 10 percent to 7 percent, which is in line with the inherent fluctuations of development.
In terms of element structure system, the amount people of working age has decreased, the saving rate has declined and the total factor productivity in the short term is slowing.
From the industrial structure aspect, the proportion of service industries exceeded that of secondary industry in GDP in 2012, but now the labour productivity of the service industry is lower than that of secondary industries.
In terms of the economic aggregates, China’s GDP reached $10.4 trillion (R144.36 trillion) in 2014.
Generally speaking, after a country’s economic aggregate reaches a certain degree, marginal growth will decrease while economic scale will increase.
If the growth rate is co-ordinated with growth potential, production factors will be fully tackled. Inflation and cyclical unemployment can be avoided.
In recent years, the registered unemployment rate in urban area stays around 4.1 percent and the surveyed unemployment rate has been around 5.1 percent, indicating China’s growth rate is reliable and acceptable.
This article is republished with permission from China’s People’s Daily.