With the growing service industry, economists see a shrinking GDP growth rate to be a normal occurrence. (Photo : www.businessinsider.com)
Chinese economists are suggesting the government to cut the annual GDP growth target for China's 13th Five-Year Plan (2016-2020) in order to make way for more reforms and a shift to a consumption-driven economy.
Most economists recommend that the annual GDP growth target be cut from the current 7 percent to 6.5 percent. Some economist are even saying that short periods of 6 percent GDP growth should be considered tolerable.
According to the sentiments of the economists, there is no need to fear an economic slowdown considering that the total size of the economy in 2014 was 63.65 trillion yuan ($10 trillion). This means that a 6.5-percent increase still amounts to 4 trillion yuan, around the size of the Chinese economy in 1994.
The GDP growth target has already been lowered recently. In March, the government decided to lower the GDP growth target of 7.5 percent last year to "around 7 percent" this year in order to give the country room to remove unwanted manufacturing capacity and help its shift to a consumption-driven economy from an export-led one.
While the economy was able to meet the 7 percent target during the first two quarters of the year, analysts are predicting a lower growth rate for the third quarter, estimating 6.8 percent.
According to Yu Bin, an economist from the State Council Development Research Center, a slower GDP growth is normal given the service industry is making up a larger portion of the economy.
"The service industry generally has a lower demand for capital investment than manufacturing industry, and inevitably when translated in terms of GDP growth, you get a smaller figure," said Yu.
However, some economists are stressing the importance of a bottom line as well.
Li Yang, an economist from the Chinese Academy of Social Sciences, said that a bottom line is necessary to prevent social turbulence, financial crises or a contraction in the job market.
