China should lower its economic growth target to around 6% for 2020 and step up stimulus as its trade war with the United States has exacerbated a protracted slowdown, government advisers said ahead of a key leadership meeting on the economy.
Growth has already cooled to a near 30-year low of 6% in the third quarter, and could slip further in the fourth quarter, though for the full year it remains on track to meet the government’s target of 6-6.5%, Yao Jingyuan, an advisor to the State Council, China’s cabinet, told reporters on Wednesday.
Next year will be crucial for the ruling Communist Party to fulfill its longstanding goal of doubling gross domestic product and incomes in the decade to 2020, and to turn China into a “modestly prosperous” nation.
“Growth should be around 6%. We cannot achieve that goal if growth is lower,” said Yao, formerly the National Bureau of Statistics’ chief economist. Another policy advisor, who declined to be named, also advocated a 6% target for 2020.
The government needs to step up stimulus to prevent growth slipping below that level next year, as that could worsen employment, government revenues, company profits, Yao said.
The State Information Centre, a top government think tank, has also proposed a target of around 6% for 2020.
The recommendation came as Chinese leaders and policymakers prepare for the annual Central Economic Work Conference, a closed-door gathering that is expected to convene next month to discuss economic targets and policy priorities.
Rising unemployment could pose a challenge for China’s stability-obsessed leaders as they grapple with a slowdown in the once-booming services sector.
China’s central bank warned on Monday of increasing downside risks for the economy, and a Reuters poll has forecast China’s growth would slip to 6.2% this year and then ease further to 5.9% in 2020.
Beijing has been relying on a mix of fiscal and monetary steps to weather the current downturn, cutting taxes and issuing local government bonds to fund infrastructure projects, while banks have been encouraged to lend by reductions in their reserve requirements.
China has brought forward 1 trillion yuan ($142.07 billion) of the 2020 local government special bonds quota to this year as it seeks to avert a sharper economic slowdown.
Yu Yongding, an influential Chinese economist who previously advised the central bank, advocates an increase in the 2020 budget deficit ratio to 3% from this year’s 2.8% to spur fiscal spending needed to secure 6% economic growth next year.
Policymakers could roll out more stimulus, though worries over debt and property market risks limit their room for action, policy insiders said.
Yao said increasing fiscal and monetary policy support would not fuel inflation, while warning that policymakers should still act to counter rising inflation expectations that fan broader price rises, as inflation has quickened to a near eight-year high of 3.8%.