China to aim for 7.5 percent growth in 2014 as exports recover

By Kevin Yao

BEIJING (Reuters) - China will likely stick with this year's growth target of 7.5 percent for 2014 as top leaders balance the need to keep the economy on an even keel while pushing through necessary structural reforms, sources at top government think tanks said.

Growth will be supported by a steady recovery in China's exports next year thanks to stronger demand from developed economies, the commerce ministry's think tank said.

The 2014 growth target was endorsed at the annual Central Economic Work Conference earlier this month, when top leaders pledged to maintain policy stability and reasonable economic growth at the closed-door meeting.

Prior to the December 10-13 meeting, some top think tanks, including the State Information Centre and the Chinese Academy of Social Sciences, had proposed to lower next year's growth target to 7 percent to create more room for reforms and discourage local governments from pursuing high growth rates.

Top leaders believe that maintaining the 7.5 percent target will help keep growth humming to create more jobs, while providing wiggle room to deepen reforms, government economists involved in the discussions about the plans said.

"Two camps who proposed growth target - 7 percent or 7.5 percent - made their points. But the government favors 7.5 percent," said an economist at the State Information Centre, who requested anonymity due to the sensitivity of the issue.

Key economic targets for 2014 will be announced by the government during the annual parliament meeting in March.

The world's second-largest economy is widely seen growing around 7.6-7.7 percent in 2013, just ahead of the government's 7.5 percent growth target, but still near the weakest pace since the Asian 1997-98 financial crisis.

Stability remains the watchword as President Xi Jinping and Premier Li Keqiang seek to put the economy on a more sustainable footing. Li said economic growth of 7.2 percent was needed to keep a lid on unemployment.

Beijing had maintained a target for growth of 8 percent for eight years before cutting it in 2012 to 7.5 percent.

Some policy advisers believe the government may change the way it manages the economy by avoiding setting a specific growth target next year - in line with its pledge to allow market forces to play a decisive role allocating resources.

At a key party plenum in November, Chinese leaders pledged to make the most sweeping changes to the economy and the country's social fabric in nearly three decades.

"The government has said it will not intervene in allocating resources, so it will be difficult for it to set a target on economic growth," said Zhao Xijun, deputy head of the Finance and Securities Institute at Renmin University in Beijing.

"They can still refer to targets in 2013. To maintain stability means that economic growth cannot be lower than 2013 and inflation cannot be higher than 2013," he said.

STRONGER EXPORTS SEEN

The government may also stick with this year's 3.5 percent inflation target for 2014, but economists cautioned that price pressures could rise as China frees up energy and utility prices. Annual inflation in 2013 is seen at 2.6-2.7 percent, below the target.

With developed economies showing signs of sustained recovery, the government has more confidence in targeting steady economic growth next year, economists said.

The commerce ministry's think thank forecast that China's exports may grow at least 10 percent in 2014 thanks to improved global demand, especially from developed countries.

"The external environment may show some improvements from this year. Exports could grow 10 percent or slightly faster," Li Jian, head of foreign trade research of the Chinese Academy of International Trade and Economic Cooperation, told Reuters.

Exports are on track to grow around 8 percent this year.

But the yuan's appreciation, along with rising wages, is putting pressure on local exporters, Li said. The yuan has risen around 36 percent since its landmark revaluation in 2005.

"It's very difficult for exporters to cope with the appreciation. Some firms have hit the wall," he said.

(Editing by Jacqueline Wong)