BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/08
The latest economic policy declarations emphasise the role of debt-finance to promote structural reforms and growth. This will worsen China’s debt problems. The biggest headache for officials still seems to be figuring out how to achieve the current 6.5–7 % growth target. There seems to be no room to consider that employment goals might be achieved with slightly lower growth and less indebtedness. Some official comments optimistically assert that the recent uncertainty is only temporary and reforms can be postponed to more appropriate times. Yesterday (Feb. 25), the markets expressed their view on uncertainty with share indexes in China dropping by more than 6 %.
Further discussion on the course of economic policy is expected next month when the People’s Congress (China’s parliament) convenes to approve this year’s budget and the revised goals for the 2016–2020 five-year plan.