Ambitious growth targets are admirable; but China’s sickly banks and horrific pollution need urgent attention, too

Smog is choking Beijing and there is huge stress on national water supply

Share

China tends to produce large numbers. Li Keqiang, the country’s premier, yesterday outlined a 2014 GDP growth target to Beijing’s rubber-stamp parliament of 7.5 per cent. That’s the kind of economic expansion Western states (even a now fast-recovering Britain) can only fantasise about. But, of course, by Chinese standards 7.5 per cent is nothing special. Indeed, this would represent the country’s weakest annual growth rate since 1990.

GDP growth matters, especially for a country playing economic catch-up like China. But it is becoming increasingly clear that this is the wrong target for the Beijing government to be aiming for.

The single GDP figure hides a multitude of dangers and distortions. Since the global credit crisis of 2008, China has become excessively reliant on infrastructure spending and capital investment to drive growth. Investment spending as a share of GDP is close to 50 per cent, well above the level deemed sustainable for even fast-developing countries like China.

And this investment has been financed by an unprecedented splurge of credit. Total private credit in the economy has soared from 140 per cent of GDP to more than 200 per cent in the space of only six years. This borrowing bonanza has mostly been financed, or facilitated, by state-controlled banks which are now, inevitably, sitting on a mountain of non-performing loans (even if the lenders themselves continue to report healthy balance sheets). Beijing has the financial firepower to recapitalise its sickly banks, but the risk of a financial crisis cannot be discounted.

Another illness concealed by robust GDP figures in recent years has been the inordinate damage inflicted on the environment by China’s energy-intensive growth. The choking smog of Beijing and the stress on China’s water supply are testament to the immense damage done.

The administration of President Xi Jinping last year outlined a sensible plan to rebalance the economy away from investment and credit and towards consumer consumption and cleaner growth. This contained many sound proposals, such as relaxing the one-child policy, easing residency restrictions, improving welfare coverage and liberalising China’s financial sector. But the question is whether this programme can be delivered when there are so many powerful vested interests that profit so handsomely from the present lopsided and polluting growth model. The danger of a concentration on GDP by officials is that it will boost the temptation for China’s politicians to soft pedal necessary reforms, or even to pull the old investment and credit levers to keep the growth number pumped up.

There are other economic measures that should be monitored more closely, including workers’ wages, consumption and carbon dioxide emissions. China’s GDP growth could moderate to, perhaps, 5 per cent and yet produce more sustainable and better balanced development than hitting 7.5 per cent under the old credit-intensive model.

Beijing must not fall into the trap of regarding a high GDP growth figure as the primary measure of its success. Quality and sustainability matter more than quantity. Even in China, bigger does not always mean better.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Tradewind Recruitment: PMLD Teacher

Negotiable: Tradewind Recruitment: PMLD Teacher A specialist primary school i...

Recruitment Genius: Online Media Sales Trainee

£15000 - £30000 per annum: Recruitment Genius: Now our rapidly expanding and A...

Recruitment Genius: Public House Manager / Management Couples

£15000 - £20000 per annum: Recruitment Genius: Are you passionate about great ...

Recruitment Genius: Production Planner

£20000 - £30000 per annum: Recruitment Genius: This fast growing reinforcing s...

Day In a Page

 

Political satire is funny, but it also causes cynicism and apathy

Yasmin Alibhai Brown
The super-rich now live in their own Elysium - they breathe better air, and eat better food, when they're not making beans on toast for their kids

The super-rich now live in their own Elysium

They breathe better air, eat better food, take better medicine
A generation of dropouts failed by colleges

Dropout generation failed by colleges

£800m a year wasted on students who quit courses before they graduate
Entering civilian life 'can be like going into the jungle' for returning soldiers

Homeless Veterans appeal

Entering civilian life can be like going into the jungle
Sam Taylor-Johnson: Woman on top

Sam Taylor-Johnson: Woman on top

Fifty Shades of Grey director on bringing the hit to the screen
Shazam! Story of the $1bn 'what's that song?' app

Shazam: Story of the $1bn 'what's that song?' app

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch