China’s decision to lower its annual GDP growth target to “around 7 percent” — the lowest level in 15 years — is understandably dominating headlines this morning in Asia. The figure matters hugely to global markets, commodity-producing nations addicted to Chinese demand and not least, the tens of thousands of mainland officials whose jobs and promotion prospects depend on meeting the numbers set by the central government.
China’s Pain Points
It’s also a useless, if not counterproductive metric. The lower number reflects the headwinds facing the Chinese economy — sputtering exports, yawning overcapacity and a mountain of bad loans. It’s also an indication that President Xi Jinping and Premier Li Keqiang may be serious about sacrificing some growth in the interests of rebalancing the economy away from investment and exports and toward consumption and services. But as I’ve argued before, any target at all is a distraction from the mission of taming China’s excesses. Two-thirds of China’s provinces and megacities missed their targets last year anyway; this year Shanghai has dropped its GDP target altogether.
If Chinese leaders feel the need to give their subordinates a concrete goal, why not switch to another metric, one that offers better insights into how well China is or isn’t doing? I’d suggest median wages.
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