Does China need to scrap growth targets to fix its environment?

Despite talk of flexibility in meeting GDP goals, some experts say China should abolish or reform its economic targets

At China’s annual parliamentary session this year the government signalled for the first time that it would allow some flexibility in meeting the national growth target.

“Our target is about 7.5%, and 7.3% or 7.2% would count,” Finance Minister Lou Jiwei said on March 5.

The size of the target affects China’s levels of industrial production, and thus the amount of energy it needs – which generally means burning coal. Given that Beijing is trying to address the nationwide catastrophic pollution caused by years of breakneck growth, a lower, more flexible target may help.

But this flexibility may not be enough. Luo Jianhua, secretary general of the China Environment Chamber of Commerce, told chinadialogue it is better "to scrap the target altogether”. He argues that having any target encourages local authorities in China to try and surpass it.

“A national GDP target amounts to a clear political signal. If the government’s growth target is 7.5%, a provincial government may well set it at 10%. A city government may even set a target of 15%.”

Cao Heping, an economist at Peking University, says Beijing should instead allow more diversity in the GDP goal. For richer areas, the number should be lower. But for less developed regions, the goal could be higher.

“China is so big,” he said, in an interview with chinadialogue. “If you apply the same growth target nationwide, it will lead to a huge waste of resources.”

“The target for the less developed western regions can be set higher. Those areas should be allowed to develop. But China should also put in place strict environmental goals so that pollution doesn’t go up.”

Some measures have been put in place already. In November 2013, Beijing said ecologically fragile areas will no longer be required to meet such growth goals. The official Xinhua News Agency says the Sichuan government has already scrapped the GDP goal for half of the province.

Zhang Junjie, assistant professor of environmental economics at UC San Diego, agrees with Cao that a variable GDP mechanism is probably the best interim measure for China, given that the promotion of officials is still strongly linked to their economic performance.

“Whether you scrap GDP or not, the shadow of GDP goals will still linger. It is right to set different goals for different areas since their pollution and development levels are so different,” he told chinadialogue.

According to Zhang, the number of polluting industries will be scaled back as the country pledges to tackle overcapacity in the steel, cement, glass and ship building sectors. China will gradually shift to a growth model fuelled by more innovative and high technology products, he says.

Li Wei, director of environmental studies at Beijing Normal University, told chinadialogue that a national growth target is useful now but will eventually be unnecessary.

“The GDP number signals the government’s wish to adjust the economy. If there is no national goal, how could we guide the shift?” he asks. “But I think the goal, which is an imperfect economic standard anyways, will be phased out when everyone understands and accepts a greener economy.”