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

Recruitment Genius: Bookkeeper

£23000 - £26000 per annum: Recruitment Genius: This small, friendly, proactive...

Recruitment Genius: Photographic Event Crew

£14500 - £22800 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Software Developers - .NET / ASP.NET / WebAPI / JavaScript

Negotiable: Recruitment Genius: A Software Developer is required to join a lea...

Austen Lloyd: Corporate Tax Solicitor - City

Excellent Salary: Austen Lloyd: A first rate opportunity to join a top ranking...

Day In a Page

Read Next
 

After Savile, we must devote our energies to stopping the child abuse taking place now

Mary Dejevsky
A ‘hugely irritated’ Sir Malcolm Rifkind on his way home from Parliament on Monday  

Before rushing to criticise Malcolm Rifkind, do you know how much being an MP can cost?

Isabel Hardman
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower