China’s 2015 GDP target may be leaked this week

Group of workers at a small parts manufacturing factory in China.
Mick Ryan | Getty Images
Group of workers at a small parts manufacturing factory in China.

Investors will keep an ear to the ground this week as China's policymakers gather in Beijing for the country's Central Economic Work Conference (CEWC) – a closed-door annual meeting that sets economic priorities for the coming year.

Dates for the meeting have not been officially announced, but the meeting is expected to kick off on Tuesday, according to Ta Kung Pao - a Hong Kong-based newspaper with ties to the mainland government. The meeting usually lasts 2-3 days.

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A key issue for the CEWC will be setting next year's gross domestic product (GDP) growth target, viewed as an important signal of policy intentions.

While the targets are typically made public in March during the National People's Congress, they are occasionally leaked to local media shortly after the meeting.

As growth appears set to fall towards the lower-end of this year's "about" 7.5 percent target,Beijing is widely expected to propose a target of 7.0 percent – the lowest in a decade.

"The new leadership has proposed the concept of an economic 'new normal', which we understand to encompass slower but more balanced growth and increased reforms. We firmly believe that the top leadership is willing to accept slower but more sustainable growth," said Chang Chun Hua, China economist at Nomura.

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"Moreover, support for a lower growth target has recently gained momentum in policy circles," said Hua.

During October's China Academy of Social Science conference, participants - many of whom were from government ministries - expressed the view that a target of 7.0 percent for 2015 would be appropriate for China's long-term potential growth, Hua said.

Mark Williams & Julian Evans-Pritchard, economists at Capital Economics expect the "about caveat" will be added to the 7.0 percent growth target once again to ensure policy flexibility.

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"Even better, though admittedly less likely, would be for policymakers to drop the target altogether while perhaps maintaining their rhetoric of 'keeping growth within a reasonable range'," Williams and Evans-Pritchard.

"This would give policymakers greater flexibility without them being seen to be cutting their growth target in response to downward pressure on the economy," they added.

In addition to setting the growth target, policymakers will also discuss other macro targets - including inflation and money supply - and lay out reform priorities.

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Nomura expects the CPI inflation target to be lowered to 3.0 percent from 3.5 percent in 2014 due to lower commodity prices and weaker domestic demand.

However, the bank says the target for money supply growth may be held steady at 13 percent so that monetary policy can be more accommodative.

Meanwhile, on the reform front, policymakers are expected to pledge to accelerate the pace of various reforms including state-owned enterprise reform, rural land reform and interest rate liberalization among others.