(Bloomberg) -- Chinese officials are evaluating whether the target for economic growth this year should be softened as part of a broader review of how the government’s plans will be affected by the deadly virus outbreak, according to people familiar with the matter.
The annual growth target is typically unveiled in March at the country’s legislative session after being endorsed by top leaders at the annual closed-door Central Economic Work Conference in December. Economists had expected China would aim for output growth of “around 6%” this year after seeking a range of 6% to 6.5% in 2019.
The change in focus should not come as a surprise to investors and economists who were already bracing for weaker growth than was previously expected amid threats to demand and the country’s supply chain. Bloomberg Economics reckons growth could dip to 4.5% in the current quarter.
Officials are though also considering further measures to shore up the economy, including increasing the planned cap on the budget deficit-to-GDP ratio and selling more special government bonds, said the people, who asked not to be identified discussing the private talks. Final decisions haven’t been made, they added.
This year’s legislative gathering, which is scheduled to begin March 5, could be delayed as the epidemic disrupts work across the country.
China’s State Council Information Office didn’t immediately respond to a request for comment. Any changes to the growth target would have to be approved by top leaders of the Communist Party.
Even before the outbreak, China’s economy was already slowing amid weak domestic demand, a crackdown on debt and the trade war with the Trump administration. GDP expanded 6.1% last year, the least in almost three decades, and just within the range targeted by President Xi Jinping’s administration.
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In a containment scenario -- with a severe but short-lived impact -- the virus could take China’s first-quarter gross domestic product growth down to 4.5% year on year, according to Bloomberg Economics. That’s a drop from 6% in the final period of 2019 and the lowest since quarterly data that begins in 1992.
Most of China’s provinces said before the virus became widespread they’re expecting slower economic growth in 2020, with at least 22 out of 31 major cities, provinces and autonomous regions cutting their targets as of Jan. 21, according to their work reports which lay out plans for this year.
China’s central bank took its first concrete steps to cushion the economy and plunging markets from the blow of the virus, providing short-term funding to banks and cutting the interest rate it charges for the money.
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The People’s Bank of China added a net 150 billion yuan ($21.4 billion) of funds on Monday using 7-day and 14-day reverse repurchase agreements. The rate for both was cut by 10 basis points, driving down the cost of the money to “ensure ample liquidity during the special period of virus control,” it said in a statement. PBOC adviser Ma Jun indicated he expects further rate cuts later in the month.
The cash injection was part of a raft of supportive measures announced over the weekend to soften a market sell-off and help firms affected by the disease outbreak and extended holiday.
(Adds forecasts in third paragraph)
To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net;Zheng Li in Shanghai at zli698@bloomberg.net
To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net, Sharon Chen, Malcolm Scott
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