Provincial Governments Lower GDP Targets as Nation Seeks Balanced Recovery

BEIJING, Feb. 2 -- Chinese provinces are scaling back economic growth targets for 2010 as the nation works to make its economic development more environmentally friendly.

At its annual legislative meeting, southern China's Guangdong province set a growth target of 9 percent, lower than its estimated 9.5 percent expansion in 2009.

The eastern province of Jiangsu earlier set a goal of 10 percent growth, down from the estimated 12.4 percent growth of last year.

Neighboring Zhejiang Province, which relies heavily on exports, is aiming for 9 percent growth. Zhejiang governor Lu Zushan told lawmakers that 30 consecutive years of double-digit growth rate will stop.

Zhejiang's economy grew at the second-slowest rate of 31 mainland provinces, autonomous regions and municipalities in the first quarter of 2009. But the rate accelerated to 8.9 percent for the year after a double-digit expansion in the second half.

The lower growth targets were set at the annual sessions of local legislatures, after China recorded strong growth in 2009 on the back of a massive fiscal stimulus package and a surge in bank loans.

Twenty-six provinces, autonomous regions and municipalities reported double-digit growth last year, compared with the national average of 8.7 percent.

"There has never been a stronger call to give up some GDP growth to transform the growth model," said Sun Wenyou, Huzhou City's party chief.

The Central Economic Conference and local legislatures have prioritized a shift to quality economic growth.

On Jan. 28, National Bureau of Statistics head Ma Jiantang said the central government will scrutinize local GDP figures by using a unified calculation to prevent provinces from faking their economic figures.

The central government's move shows it is serious about transforming the form of China's economic growth, Zhuo Yongliang, director of Zhejiang Province's Development and Reform Research Institute, said.

"Governments should use guidance to tackle structural problems like the imbalance between domestic and external demand and imbalances between the industrial and service sectors."

The current economic downturn prompted by the global financial crisis highlighted many structural problems, and no local government can turn a blind eye to them, Zhao said.

As local legislature meetings are held across the country, he foresaw more powerful and concrete action being taken by the local governments.

In some regions, a desire for more sustainable growth was evident even as the national economy weakened rapidly last year. Drastic action was taken in Shanxi province, for example.

Shanxi's major industry, coal mining, was restructured to close smaller collieries. Consequently, Shanxi's economy contracted 4.4 percent in the first half of 2009. For the whole year, the province's GDP grew 6 percent, 2.7 percentage points lower than the national average.

Hu Angang, director of the Center for China Study at Tsinghua University said the transformation is crucial.

"A raft of uncertainties will hit China if it doesn't change its model of economic growth to something more rational and environmentally friendly," he said.

Key to the model of growth transformation, as the effect of the 4 trillion yuan (586 billion U.S. dollars) fiscal stimulus package wanes, is private investment, some scholars have noted.

Jia Kang, director of the Institute for Fiscal Science Research at the Ministry of Finance, said private investors are still not active but are less jittery than they were at the height of the economic downturn.

"Of course, it is too early to say private investment has revived," Jia said.

Continued weak global consumption could still take a toll on growth engines like the export-oriented Pearl River and Yangtze River deltas.

"China's recovery is not yet firm," said an analyst in Zhejiang's Yiwu City, home to the world's biggest small commodity market. "Globally, the economic recovery has not spurred a full revival of consumption."

Analysts said demand for Chinese exports may not see significant improvement for three years as U.S.-style credit-based consumption may be gone forever.