China has cut its growth target for this year by half a percentage point to about 7 per cent, a level that would mark its slowest expansion in a quarter of a century.
It also ought to dispel any notion that its leadership can engineer a fairly smooth economic transition toward the greater manufacture and domestic consumption of higher-value goods without serious growth hiccups and heavy state intervention.
The less optimistic outlook makes sense for a government that typically does whatever is necessary to meet – and preferably exceed – its publicly avowed goals for the economy.
The technocrats have known for some time that the sputtering economy has no chance of exceeding 7 per cent growth this year, and that it may take considerable data massaging (a government specialty) just to reach the lower bar. Major headwinds include continued weak demand in key export markets, serious manufacturing overcapacity and a bubble-ridden property market teetering on the brink.
"The downward pressure on China's economy is intensifying," Premier Li Keqiang told about 3,000 delegates attending the annual gathering of the Chinese parliament, the National People's Congress. "Deep-seated problems in the country's economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year."
Although a handful of China watchers concur with the revised target, the International Monetary Fund pegs growth this year at 6.8 per cent and other analysts are more bearish.
"Meeting even the reduced targets for 2015 would require a substantial improvement in economic conditions compared to the second half of 2014, making their realization unlikely," says Brian Jackson, IHS Global Insight's China economist. He expects GDP to rise by no more than 6.5 per cent.
That's a far cry from the average annual rate of nearly 9.1 per cent from 1989 to 2014. It last reached double-digits in 2010.
Last year, the economy fell just short of Beijing's 7.5-per-cent projection, expanding at a 7.4-per-cent clip. It was only the third time the reported numbers ended up worse than expectations since the government started revealing its annual targets in the 1980s.
To shore up the economy, Beijing is once again easing monetary policy and boosting public spending, although with less gusto than its bold stimulus response to the global financial crisis in 2009.
Mr. Li said the government would stay the course in its planned liberalization of the banking system and financial markets, as well as the more difficult task of overhauling the state-controlled enterprises that dominate key sectors of the economy and bleed red ink.
At one point, he sounded more like U.S. money manager Bill Gross than one of the leaders of the world's second-largest economy. Using Mr. Gross's much publicized description of the postcrisis world, he described slower growth as China's "new normal."
He also stressed the importance of steering clear of the "middle-income trap" by maintaining "an appropriate growth rate."
This is no small concern. China is faced with a maturing economy coming down to earth after years of heady expansion off of an extremely low base. However, it must maintain strong growth to keep unemployment low and social unrest in check.
Other former rapid-growth stars, including Japan and later South Korea and Taiwan, all slowed once their per-capita income passed the $5,000 (U.S.) threshold for middle-income economies. China is getting there fast. Disposable personal income reached a high-water mark of more than $4,600 last year.