China Hints At Missing Economic Growth Target Amid Banking Crisis, Declining Population

Chinese leaders muted expectations of economic growth in the second half of 2022, all but acknowledging that China will miss its growth target for this year, The Wall Street Journal reported Thursday.

China’s policy-making body, referred to in shorthand as the Politburo, urged more productive provinces to meet their annual economic growth targets in a quarterly economic meeting and implied that others were not expected to reach their objectives, according to the WSJ. The Politburo vowed to promote economic growth within “a reasonable range” in a statement Thursday after the meeting adjourned, suggesting the range may fall short of the desired 5.5% expansion in gross domestic production (GDP) for 2022.

“China doesn’t have many more years until growth stops due to demographic contraction,” Derek Scissors, a senior fellow at the American Enterprise Institute who focuses on China and economic issues, told the Daily Caller News Foundation. “Every year the economy underperform[s] lowers the ceiling on how rich China can get before it becomes cripplingly old.”

China’s declining population reduces the number of working-age people who can contribute to the economy. Ministerial leaders reaffirmed their commitment to China’s Zero-COVID policy, while the country deals with real estate insecurities and a highly unstable rural banking system, according to the WSJ.

Policymakers said they would “strive to achieve the best results possible” but did not explicitly mention the initial growth targets, the WSJ reported.

“Adherence to socialism with Chinese characteristics and the guidance of the latest achievement in adapting Marxism to the Chinese context and the needs of the times on the new journey to build a modern socialist country in all respects,” President Xi said in a statement at a Politburo study session, held from July 26 to 27 in Beijing.

So far, China hasn’t taken any actions indicating a push to stimulate growth, according to the WSJ. While it has already issued 93% of available special bonds and encouraged provinces to cash in, it didn’t increase bond quotas.

“The 5.5% growth target is no longer a must for China,” Iris Pang, chief China economist at ING Bank, told the WSJ. Pang said measures taken to address COVID-19 would continue to interfere with economic growth in the future, and that backing off from more ambitious growth aims would minimize stimulus-driven economic inefficiencies.

Slowing GDP growth will not affect China much in the short term, Scissors told the DCNF. “China’s labor force is shrinking and fast growth is no longer necessary just to sop up workers,” he said.

China’s posted dismal numbers for its second quarter growth at .04%, the WSJ reported. To meet its yearly growth targets, it would have to sustain 8% growth throughout the second half of 2022.

Premier Li Keqiang, head of China’s State Council, said that China would refrain from taking dramatic measures to meet “an overly high growth target,” the WSJ reported.

“We made every effort to finish building a moderately prosperous society in all respects, promote high-quality development, and advance reform swiftly but steadily,” said Xi.

The Politburo could not be reached for comment. The Chinese Central Government did not respond to the DCNF’s request for comment.