As local governments across China announce their economic growth targets for 2021, everyone’s attention is on how appropriate those targets seem.
At least 25 provinces had made their year-on-year economic growth targets for 2021 public by Friday, setting it at no less than 6 percent. With the novel coronavirus pandemic still raging around the world and uncertainties still looming, such growth targets seem ambitious.
The local governments have set the target after careful calculation, but such a target is likely to be “very sweet year-on-year, but very bitter quarter-on-quarter” for 2021, because the year-on-year growth rate is accurate only when the economy is relatively stable, and in most cases the quarter-on-quarter growth rate better reflects the local economic condition.
If the quarter-on-quarter growth rate is used to measure the economy, the volatility of economic growth must be fully taken into consideration and the impact of fluctuations on economic growth eliminated.
If a year-on-year economic growth approach is adopted, considering last year’s low economic base, it is easy for a high growth rate to be achieved this year.
In this case, the year-on-year growth target could easily lead to the illusion that a high growth speed has been achieved.
Compared with the developed economies, we can use the year-on-year growth rate to show that the Chinese economy is resilient and has recovered relatively well.
But when it comes to judging China’s real economic growth, we should also look at the quarter-on-quarter growth rate to know how well it is doing.
At a time when the overall macroeconomic environment is still complex and local governments have not completely shifted their focus to the real economy, it is still necessary for all regions to set a specific economic growth target, but the problem is what target should be set and how to accomplish it.
In addition to setting a target for economic growth and properly handling the relationship between year-on-year and quarter-on-quarter growth rates, more efforts should be made to ensure the quality and efficiency of economic growth.
This is the top authorities’ new development philosophy and should be followed in the country’s economically developed regions.