In the March 2016 National People’s Congress session, Xi Jinping set 6.5% as the GDP growth target for the next 5 years? This number has nothing to do with economics. It’s all about politics and the logic is as follows:
- In October 2015, the Fifth Plenum of the 18th Central Committee set itself the ambition of doubling the 2010 GDP by 2021.
- Why 2021? Because it is the 100th anniversary of the founding of the Chinese Communist Party (CCP). Doubling the GDP so that China becomes a “moderately well-off society” will fulfill one of the “two centenary goals” of the CCP, very key to sustaining its legitimacy.
- Take a look at the realized GDP growth rates for the past 5 years: 2011-9.5%; 2012-7.8%; 2013-7.7%; 2014-7.3%; 2015-6.9%.
- If the average growth rate for the next 5 years from 2016 to 2020 is 6.5%, the 2021 GDP will be exactly double that of 2010. Mathematically: (1+9.5%)*(1+7.8%)*(1+7.7%)*(1+7.3%)*(1+6.9%)*(1+6.5%)^5=2.
The good news is that China is on track to realize this political feat - in January 2017, China announced that its 2016 GDP growth is 6.7%, above the 6.5% minimum target.