China abandons numerical economic targets

Richard McGregor – The Financial Times

Copyright The Financial Times
Published: March 6 2006
China is ditching nearly all numerical economic targets from its
decades old
planning system as part of an effort to change the country’s obsession
growth at the expense of social programmes and the environment.
The National Development and Reform Commission, the chief planning
said that economic targets in the country’s latest five-year plan,
on Monday, had been pared back to give “greater play to market forces.”
Only two economic targets have been included in the plan – a promise to
double per capita GDP in the 10 years to 2010 and reduce energy
per unit of output in the five years to the end of the decade.
“Our economic growth may be increasing but we would like to know the
environmental price we are paying to achieve it,” said Ma Kai, the NDRC
chairman, at the annual meeting of the National People’s Congress.
All of the other “obligatory” targets in the new plan focus on social
spending, in education and health, and on the environment, including
disposal of waste and pollutants.
Fan Jianping, the director of the economic forecasting department of
State Information Centre, said the aim of the reform was to distinguish
“which area is the responsibility of the government and which should be
to the market.”
“By setting ‘non-obligatory’ targets, governments will no longer need
announce concrete growth figures for sectors such as steel and autos,”
Fan said.
Another, largely unstated, reason for change is that the planning
has become discredited by the NDRC’s off-target predictions in recent
especially for power generation and coal production.
The old numerical targets have become embarrassingly outmoded in
ever more complex mixed economy, which includes a dynamic private
forcing the NDRC to recalibrate its role.
“In order to change the old impression that a plan is of no more use
some kind of drawing that you hang on your wall, we have put a great
deal of
preparation into the implementation of this plan,” said Zhu Zhixin, an
The scaled-back planning system is also designed to reinforce the
emphasis on no longer pursuing GDP growth for its own sake, without
to the environment.
However, this has been a difficult policy to enforce at a grassroots
where local officials have been mostly rated by the central government
according to economic growth in their locality.
Arthur Kroeber, of China Economic Quarterly in Beijing, said the
changes to
the five-year plan was “part of the process of reorienting the
within the system.”
“The problem is that it is not clear how this jibes with the existing
evaluation performance criteria, in which all the benchmarks, except
family planning, have been economic,” he said.
In 2000, at the start of the last five-year plan, China predicted
average growth of 7 per cent until 2005 and hefty increases in coal
production and power capacity.
Their predictions were well off the mark. Growth averaged over 9 per
per annum; coal output was almost double what the planning ministry
predicted and power capacity about 20 per cent higher.
Mr Ma said on Monday that the government’s role now was to “create
favourable conditions” so that Beijing’s few binding targets could be

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