Overheating fears grow as China's local governments set GDP targets high

08:31, January 26, 2011      

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Some local governments plan on doubling their Gross Domestic Product within five years as China ushers in its 12th Five-Year Program (2011-2015), raising concerns that the Chinese economy could overheat.

At the starting point of the 12th Five-Year Program, local governments have released their GDP targets for the next five years at the annual meeting of the local legislature.

Many set double-digit growth targets for the coming five years and some even proposed doubling their 2010 GDP by the end of 2015.

A rough calculation shows that to double the GDP in five years, an annual growth of 14.87 percent would be needed. That is even faster than China's 10.3 percent GDP growth in 2010, and 9.2 percent in 2009.

Southwestern China's Chongqing Municipality planned to reach an annual GDP growth rate of 12.5 percent and double local GDP per capita to 8,000 U.S. dollars by 2015.

Jiangmen city of southern Guangdong Province has set its sights even higher. It eyes an average annual GDP growth of 15 percent, much higher than the 8 percent target for the whole province.

Only a few regions lowered their GDP targets. For example, Shenzhen lowered its growth target to 10 percent from 13.5 percent in the 11th Five-Year Program.

The enthusiasm about economic growth figures of local governments has triggered authorities and economists to worry about the economy overheating, and put further pressure on inflation management and economic restructuring.

Addressing the national working conference on energy on Jan. 7, Zhang Ping, director of the National Development and Reform Commission (NDRC), China's top economic planning body, said most provinces set their 2011-2015 GDP targets too high and failed to take into consideration the constraints of environmental protection, energy and resources.

Yao Jingyuan, chief economist of the National Bureau of Statistics (NBS), said if the economy grows too fast, it would undermine both price stability and economic restructuring.

China is facing great inflationary pressures after its CPI hit a 28-month high of 5.1 percent in November 2010. Though the CPI slowed to 4.6 percent in December, it still poses a great challenge for the government to balance inflation controls and economic growth.

"We should make every endeavor to step on the brake peddle for our economy to maintain a moderate growth rate and avoid overheating of the economy. I personally think a growth rate of 8 to 9 percent will be great," said Yao.

The high GDP targets set by local governments also show that the growth pattern adopted by local governments remain unchanged.

If they still emphasize economic scale instead of efficiency, on growth rates instead of technological progress, they are still on the traditional track of economic growth, according to Wang Yuanjing, a researcher with the NDRC.

"Local governments should not emphasize only economic growth, but also stress people's livelihoods and harmonious development," said Wang.

The Proposal on Formulating the Twelfth Five-Year Program (2011-2015) on National Economic and Social Development, released in October, said that accelerating the transformation of China's economic development pattern would be the major task in the 12th Five-Year Program period.

However, some local governments usually turn away from the tasks given by the central government and focus mainly on GDP figures, largely due to the current official evaluation system which greatly emphasizes GDP growth.

Wang Yuanjing noted the evaluation of local officials should take social, economic and environmental effects into consideration to reduce their addictions to GDP growth.

Source: Xinhua
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