By  Daniel Moss / 

In China, don’t forget the ones that got away.

This month’s session of the National People’s Congress, the legislature that typically rubber stamps the Communist Party’s wishes, made plenty of headlines on personnel and policies. Also telling is what didn’t happen and who didn’t get what job.

 Notable omissions send important signals on what type of economy the incoming cabinet envisages and how much latitude the central bank, itself under new leadership, will have to steer it.

The broader task for the People’s Bank of China goes beyond managing short- to medium-term fluctuations in the economy. The country needs a central bank and financial markets geared for world leadership, given projections that the size of China’s will surpass the U.S. in little more than a decade.

Much oxygen at the opening of the legislature was sucked up by the revelation that China’s presidents will no longer face term limits. That’s a big deal — notably for the current president, Xi Jinping. But it overshadowed a key nuance in Premier Li Keqiang’s remarks at the outset. The government’s growth target for 2018 will remain “around 6.5 percent,” he said. Critically, Li omitted the qualifier “higher if possible in practice.”

This signals comfort with still-slower growth and less of an obsession with an actual target of gross domestic product. If things cool off a bit, don’t anticipate a big response. Given concerns about climbing debt, that nonresponse would be wise; the rash action would be to inflate debt further in order to pump up growth numbers. The Communist Party also places a premium on stability. It’s a question of balance, but Li’s speech gave a glimpse at which way the wind is going.

China’s target for the budget deficit was also shaved, to 2.6 percent of gross domestic product this year, from 3 percent in 2017. As my Bloomberg Economics colleague Tom Orlik notes, the buzz prior to the conclave was that the target might be less aggressive, say 2.9 percent. Li also balked at some key targets for money supply. Restraint seems to be the big theme here. Read more…


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