Is China Really Mulling a Lower Growth Forecast?
According to local media reports, China could lower its official growth forecast to 7 percent next year – a move that would definitely be worth watching and one that suggests Beijing is growing more comfortable with slower pace of growth, China watchers say.
Economic growth of 7 percent is the bottom line for policymakers and any stimulus efforts could make the task of controlling the property market and inflation much harder, the China Securities Journal reported late last week.
In addition, press reports say that Premier Li Keqiang has requested studies on the feasibility of lowering the official growth target to 7 percent next year. China targets economic growth at 7.5 percent this year, the same level as in 2012.
"One of the things that concern me right now is a comment over the weekend from China that the government may be looking at a 7 percent GDP outlook for next year," Tony Nash, managing director at IHS Consulting told CNBC.
"It was a fairly low-level comment, on one of the front pages of a business publication. But that is something we really need to look out for especially going out to the second half of the year," he added.
The outlook for the world's second biggest economy is very much in focus amid signs of weaker-than-expected growth.
China's economy slowed unexpectedly in the first quarter and April data released on Monday suggest another disappointing quarter could be in the works.
Industrial output rose a weaker-than-expected 9.3 percent in April, from a year earlier. Fixed asset investment, a key contributor to economic activity, rose 20.6 percent in the first four months of the year – also rising by less than expected.
(Read More: China Shaping Up for Another Disappointing Quarter)
"We are also hearing that China could downgrade its growth forecast next year and we do think that's likely," said Alistair Chan, an economist with Moody's Analytics in Sydney. "They (Beijing policymakers) are probably going to lower their GDP forecasts for every year going forward as China's potential growth rate slows."
Fast to Slow
China's economy has grown at average rate of 10 percent annually over the past three decades. To shift the economy to a more sustainable level of growth long-term, Beijing has pledged to make domestic consumption, rather than investment and exports, the key driver of economic activity.
Doing this requires reforms and a tolerance of lower levels of growth as the shift takes place, economists say.
"China's economy has grown 10-12 percent for a long time and now it's adjusting," Barclays Investment Strategist Wellian Wiranto told CNBC Asia's "Cash Flow" on Tuesday.
(Read More: Will Chinese Consumption Hold Up?)
"Investors in China still need to wake up to the idea that China is onto a new path of growth. The pace of reforms could pick up and we are hearing on the grapevine that there are committees being set up to look at ways of boosting consumption."
China's economy grew 7.8 percent last year, its weakest level since 1999.
Analysts say part of the incentive for targeting a lower rate of growth as the economy re-balances is to send a message that Beijing is unlikely to deliver aggressive fiscal stimulus as it has done in the past to boost growth.
"They are signaling that the 4 trillion renminbi stimulus won't happen again, it's a signal to local governments not to worry too much about slowing growth," said Chan, referring to Beijing's decision in 2008 to pump roughly $585 billion into the economy in the face of a global financial crisis.
One consequence of that hefty stimulus was a housing market boom that fueled inflation – something economists say China's policy makers are keen to avoid again.
— By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter: @DharaCNBC