The global economic downturn is creating new realities in China, as well as opportunities to realign and rebalance the economy on a more sustainable growth model. The new, lower annual gross domestic product (GDP) growth target of 7.5% announced in the recent draft budget not only reflects the financial realities facing China, caused by the ongoing troubles in the global economy, particularly Europe, but also Beijing’s long-term goal of seeking more balanced growth with less reliance on investment and net exports and a greater role for domestic consumption.
The new lower growth target is in line with the lower 7% annual target in China’s 12th Five-Year-Plan (2011-2015) and is understood to be part of a new era of financial sector reform and liberalisation. With new political leadership coming later in the year, the groundwork is being done for a rebalancing of the economic structure, a new round of strategic reforms and greater private sector participation.
