Last week, China began its biggest annual political gathering, the so-called Two Sessions (lianghui). The early policy documents and speeches to come out of the Beijing gathering have surprised many investors and political analysts with their caution and lack of ambition. The era of striving for sky-high growth rates is clearly over. Rather, Chinese GDP growth is likely to underperform expectations this year and beyond. With sober-minded, fiscally conservative planners now firmly in control of policy, Beijing is turning its attention to debt reduction and a daunting agenda of structural reform.
One of the first signs of the shift came when Chinese Premier Li Keqiang’s annual Government Work Report issued a strikingly conservative GDP target of more than 6 percent. Many financial analysts, following the International Monetary Fund’s projections, had expected 8 percent or more.
