China's Vice Premier Seeks "Reasonable Growth"

China's Vice Premier says "high speed growth" is a thing of the past and instead says China Will Keep Economic Growth in Reasonable Range

China's economy faces increased downward pressure this year, Vice Premier Zhang Gaoli said on Sunday, while reiterating that economic growth must be kept within a reasonable range.

China's economic growth slowed to just 7.4 percent last year, the slowest in 24 years. Beijing has set a target for growth of around 7 percent for 2015.

"The downward pressure on China's economy increased somewhat since the start of this year," Zhang told a high-level conference in Beijing.

"It's impossible and unnecessary for us to maintain the high-speed growth seen in the past," he added.

"We have paid a price and it's unsustainable. We should focus on improving quality and efficiency, change models and adjust structures."

Preposterous Growth

7 percent is not reasonable. Something like 2 percent may be reasonable, but targets themselves are silly. Moreover, it's highly doubtful China grew at 7.4% last year. In fact, China may not have grown at all in the 4th quarter.

The problem with preposterous growth targets is that it puts pressure on local governments to achieve them. Two things happen: local officials make up numbers or worse yet, take silly risks to meet targets.

For a realistic assessment of China's growth please see Reality Check: How Fast is China Growing? Global Recession at Hand

My followup was China's Deflationary Bust and Beyond: Anne Stevenson-Yang Presentation

Vice Premier Zhang Gaoli says "We have paid a price and it's unsustainable."

The only accurate part of his statement is "it's unsustainable." No price has been paid yet, but it's coming.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.