China’s New Leaders Will Seek a Higher “Quality and Efficiency” of Growth, In Other words Slower Growth

“China said it will seek a higher “quality and efficiency” of growth next year, signaling new leaders may accept a reduced pace of expansion in exchange for a more sustainable model.

There was no mention of seeking “relatively fast” growth, a policy in place since 2006, in a report yesterday by the state-run Xinhua News Agency after the annual central economic work conference in Beijing. Leaders vowed to target “sustained and healthy development” as they maintain a “prudent” monetary policy and “proactive” fiscal stance, Xinhua said.

Chinese leaders assuming power in a once-a-decade handover to be completed in March must decide the pace of market-driven change to boost consumer demand and rein in the role ofexports and investment. Communist Party chief Xi Jinping, who made the case for restructuring during a visit to the southern Guangdong province this month, faces an economy likely to have grown this year at the weakest rate since 1999.

“Now the focus is firmly on reform for next year and the future,” said Shen Jianguang, Hong Kong-based chief Asia economist at Mizuho Securities Asia Ltd. “The key to watch is how fast the new leadership will proceed with the real tough structural change and reform. Many of these are easier said than done.”

Even so, “next year is considered a vital year for the new leadership,” so the government will not allow a so-called hard landing in growth, Shen said.”

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