On purpose?

Finance minister puzzles with remark about GDP growth

On purpose?

Chinese finance ministers tend to be an anonymous bunch, and WiC thinks that most of its readers would be hard-pressed to name any of the five last incumbents. That’s understandable, as discussion of economic policy tends to focus on the comments of the president or the premier, rather than the minister of finance.

But that changed last week when Lou Jiwei, the latest occupant of the role, became the centre of attention after speaking in Washington.

The reason? Lou was quoted in the international media as telling Xinhua: “There is no doubt that China can achieve the growth target, though the 7% goal should not be considered as the bottom line.”

Coming a day before the latest GDP figures were released on Monday, the statement was interpreted as a warning sign that the economy could slow to a rate substantially lower than the government’s annual target of 7.5% – a threshold announced only a few months ago.

Signs that the targeted level isn’t achievable, perhaps? Two days later Xinhua changed Lou’s statement to something much more in keeping with the Party line: “There is no doubt that China can achieve this year’s growth target of 7.5%.”

Of course, Xinhua’s alteration fed further speculation. Had Lou revealed a secret growth target known only to the Party elite? Or was he trying to manage expectations? In much the same way that Ben Bernanke has floated the idea of ‘tapering’ Washington’s policy on quantitative easing, i.e to prepare the market for a new status quo?

This week it was announced that second quarter GDP growth had slowed to 7.5%, from 7.7% in the first quarter. HSBC forecasts that full year growth will be 7.4%, suggesting second half growth will slow further to 7.2%.

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