The Political Logic of China’s GDP Growth Target

I’m a political analyst, not an economist. But in many situations, it’s more than enough for me to understand the logic behind the Chinese economy.

As an important example: in the March 2016 National People’s Congress session, why did Xi Jinping set 6.5% as the GDP growth target for the next 5 years?

This number has nothing to do with economics. It’s all about politics and the logic is as follows:

  1. In October 2015, the Fifth Plenum of the 18th Central Committee set itself the ambition of doubling the 2010 GDP by 2021.
  2. Why 2021? Because it is the 100th anniversary of the founding of the Chinese Communist Party (CCP). Doubling the GDP so that China becomes a “moderately well-off society” will fulfill one of the “two centenary goals” of the CCP, very key to sustaining its legitimacy.
  3. Take a look at the realized GDP growth rates for the past 5 years: 2011-9.5%; 2012-7.8%; 2013-7.7%; 2014-7.3%; 2015-6.9%.
  4. If the average growth rate for the next 5 years from 2016 to 2020 is 6.5%, the 2021 GDP will be exactly double that of 2010. Mathematically: (1+9.5%)*(1+7.8%)*(1+7.7%)*(1+7.3%)*(1+6.9%)*(1+6.5%)^5=2.
Advertisements