China should mull a 4% GDP target, focus on jobs, debts in next five years, says former official

The Star

27-05-2025

A former senior economic planner has called for China's annual growth target to be lowered for the next five years, factoring in the likelihood of a protracted rivalry with the United States and the need to solve deep-rooted structural problems in China.
Xu Lin, who helped draft Beijing's five-year plan for decades while an official at the National Development and Reform Commission, made the comments as the world's second-largest economy is increasingly relying on economic planning for continued growth.
Compared with some market estimates of around 4.5 per cent annual growth from 2026-30, he said the potential growth rate and growth target figure should be around 4 per cent in the next five to 10 years, owing to China's shrinking population, its falling savings and production rate, and other headwinds.
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'It is inappropriate to set a target higher than the potential growth in China's 15th five-year plan, if considering the complex international environment and domestic difficulties such as property, the debt down-cycle and weak market confidence,' Xu told Comparative Studies magazine in an interview published on social media on Tuesday.
'An annual 4 per cent GDP growth would be very good if employment can be expanded and the debt ratio is controlled,' said Xu, who is now academic director of the Pangoal Institution, a Beijing-based think tank, and also chairman of China-US Green Fund.
China did not give a quantitative growth target in its 2021-2025 development plan, but the market has largely been estimating an annual expansion of at least 4.8 per cent until 2035 based on leadership's goal of doubling the country's gross domestic product by then. "Given the intensification of China-US strategic competition, the external environment will become more complicated"
Growth pressure has been mounting since the pandemic and amid a tumultuous trade war with the US. Meanwhile, the potential for growth and Chinese leadership's assessment of the external environment are important factors in Beijing's setting of economic growth targets.
'Given the intensification of China-US strategic competition, the external environment will become more complicated over the next five years,' he said, adding that 'this will bring new uncertainties for outbound Chinese investment and its reliance on the international market and resources'.
Despite China's rapid advancements in artificial intelligence and robotics, Xu said more consideration should be given to how much these sectors can meaningfully lift economic growth.
The ex-official also warned against using short-term stimulus measures, suggesting instead that the government roll back outdated supply-side curbs that stifle demand in high-elasticity sectors such as services, culture and leisure, as such curbs are choking consumption before it can take root.
He advocated for unleashing market forces, expanding private-sector participation, and advancing structural reforms to ensure long-term, resilient growth.
'The most dynamic and fastest-growing periods of China's economy since the reform and opening-up era were often when the market was given the most freedom – even if things looked a little chaotic,' Xu said.
Xu also pointed to three structural shifts – the rise of the service economy, digital and intelligent transformation, and the green transition – as long-term engines of sustainable growth. He said those areas could fuel China's economic momentum for the next two decades.
With flexible job creation and low entry barriers, the sector has become a safety net during economic slowdowns – absorbing laid-off workers through platforms such as food delivery, logistics and ride-hailing. Services now account for 48 per cent of total employment, outpacing both manufacturing and agriculture, which create 29 and 23 per cent of jobs, respectively. The services sector also generates more jobs per unit of GDP than other sectors.
Cities such as Tokyo, Hong Kong, Singapore and New York offer valuable lessons, he said, with mature service economies that China could look to for inspiration.
President Xi Jinping this week called for public input on China's 2026-30 national development plan, with a stated emphasis on science, technology and modernisation – a sign of the leadership's evolving strategic priorities.
A full blueprint, including detailed economic and social targets, is expected to be unveiled in March.
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