China’s GDP remains relevant. An aggressive target of say, 6.5 per cent for 2019 will reinforce the government’s countercyclical stance.
In developed countries a negative gap between potential and actual output will prompt easing or tax cuts. In China the gap also represents their bottom line.
It’s important to bear in mind Chinese President Xi Jinping has ordered China to celebrate the 70th anniversary of the People’s Republic of China with a good economic performance. Such a stance is costly.
Lacking a major productivity breakthrough with a shrinking labour force, China will still boost credit in a Cobb-Douglas production framework. The People’s Bank of China will continue to cut the reserve requirement ratio every quarter.
China may go back to the same old property driven growth model. In 2019 its GDP slowdown may decouple from financial market performance.
Raymond Yeung is Chief Economist, Greater China at ANZ
This story is an edited version of the ANZ Research report “China in ten charts - the meaning of China's GDP”, published on January 21, 2019. You can read the full, original report HERE.