China: Economic Work Conference Statement Stresses Reforms, Reasonable Economic Growth For 2014

China wrapped up a key economic conference Friday, with the government stressing the need to push ahead with reforms while also ensuring reasonable economic growth.

All the seven standing committee members of the Politburo attended the closed-door annual Economic Work Conference, which was held over four days this week. According to a statement carried by state media after the end of the meeting, China’s macro policy stance remains “pro-active fiscal policy” and “prudent monetary policy.”

The conference recognizes the stabilization and gradual improvement in economic growth this year. Meanwhile, it highlights that the Chinese economy still faces downward pressure, as some industries experience serious overcapacity problems, with complications in the labor markets, deterioration in the environment and problems of food and medicine safety as well as social unrest.

The official document, read on state radio and television, referred to the crucial role of consumption as an economic driver of the future. China will “make efforts to free up demand, give full play to the fundamental role of consumption, the pivotal role of investment and the supporting role of exports,” the statement said.

Similar to last year, the Economic Work Conference did not specify the gross domestic product growth and inflation targets for 2014. Although these key economic targets for 2013 were accurately leaked in 2012 shortly after the conference, they were officially revealed at the National People’s Congress in March this year.

The GDP target was 7.5 percent in 2012 and “about 7.5 percent” this year. The difference reflects a subtle downgrading of the target as a policy goal. Officials, including Premier Li Keqiang, have started to talk of two “bottom lines,” the other being for employment.

A recent Reuters poll showed Chinese GDP growth this year could slow to 7.6 percent -- the weakest in 14 years. Beijing had maintained an annual growth target of 8 percent for eight years before cutting it to 7.5 percent in 2012.

Economists had been looking for signs of whether China would maintain a target of 7.5 percent growth for next year or lower it to a more attainable 7 percent – a target that would signal Beijing’s determination to deepen reform efforts.

The conference laid out six major targets for next year’s economic policy: 1) Ensure stable supply and quality of agricultural products and food safety; 2) Speed up industrial structural adjustment and resolve overcapacity problems; 3) Prevent risks from local government debt; 4) Push for coordinative regional developments; 5) Raise the average living standard and support affordable housing programs; and 6) Further open up the economy, push ahead with free trade zone negotiations.

The statement mentioned that the central leading group on deepening reform, initiated at the 3rd Plenary Session last month, will be led by the Political Bureau and the Standing Committee members, the party's highest echelon. Reform leading units also will be set up at the local government levels, to be led by key officials.

“Overall, there is no major surprise in the statement from the economic work conference,” J.P. Morgan Greater China Economic Research team led by Grace Ng wrote in a note. “The tone on macro policy is consistent with our policy outlook for 2014.”

JPMorgan expects China’s economic growth pace to ease from 7.6 percent in 2013 to 7.4 percent in 2014, with modest easing in investment growth, relatively solid consumption and some moderate upturn in the export sector, supported by the global economic recovery.

CPI inflation is projected to move up gradually in 2014, but at a moderate and manageable pace. The firm has penciled in a 2014 average inflation rate of 3.3 percent, compared with an expected rate of 2.7 percent for this year.