Revised GDP methodology helps only little with China’s 2020 growth target

In 2012, president Hu Jintao declared that by 2020 Chinese GDP and per capita incomes would be double that of 2010. These goals still seem unrealistic and even unwise from the standpoint of sustainable economic policy. With the change in GDP calculation methodology at the start of July, these goals are not much closer. Annual real GDP growth in 2016–2020 still needs to be on average around 6.5 % to push real GDP across the “doubling” finish line in 2020. The doubling of per capita income also requires continued rapid growth.

The notion of setting growth targets is a legacy from command economy times. As China’s economy has embraced market elements, the wisdom of pursuing numeric growth targets has become questionable. Strict adherence to growth targets and linking them to career advancement in high posts leads to perverse incentives that drive inefficient expansion plans and waste national resources, which in turn creates economic imbalances and other problems.