China to opt for 7% growth, higher deficit, higher consumption in 2015?

BEIJING – China’s annual Central Economic Work Conference is expected to occur this week, although it is not typically announced in advance. Ahead of the key policy-makers’ conference, analysts have made the prediction that China’s 2015 growth target will be cut to 7%, with downward pressures such as a deflating property bubble, high debt levels and potential deflation holding a strong influence over the Chinese economy.

In response, top policy-makers are trying to work out how to increase consumption to a position where it can surpass investment and exports in terms of significance. While the meeting is scheduled for this week, its conclusions will probably not be formally unveiled until March.

Economists, meanwhile, are also calling for more proactive fiscal policies, envisioning China drawing up a larger budget deficit for 2015. Assuming 7% growth next year, the deficit would be between RMB 1.9 trillion and RMB 1.35 trillion (USD 220 billion), the latter of which is also China’s fiscal deficit target for 2014 (a modest target compared with international standards, some have said, but also a substantial increase from last year).

Believing fiscal policy should assume a larger responsibility in stabilizing the growth rate, representatives from Everbright Securities argue that the fiscal policy could be bolder, with a deficit of at least 2 trillion yuan. www.webershandwick.cn (ATI).