How much should China’s target growth rate be set at next year? After the Central Economic Working Committee met recently this has become a hot topic in many circles. Some economists believe that it should be eight percent, while other scholars are calling for a more significant adjustment. Our view is that in 2007 the growth rate should be moderately readjusted to nine percent.
   
For two years the growth rate has been fixed at around eight percent, up from seven percent during the six years previous. At the beginning of the 2005 adjustment, on the basis that China was in a growth cycle, the rate increase seemed rational. But the other side to the adjustment was an acknowledgement that the economy should not be let to grow out of control.
    
According to economists’ calculations, China’s optimal growth region is between eight and ten percent. Eight percent is an ideal lower limit. Experience tells us that if it dips below eight percent, not only will industry face shrinking profits, but unemployment pressure will mount as well.
    
But economists are divided on the upper limit. Some scholars believe that exceeding ten percent growth is fine, while others believe that nine percent is the most sustainable by our resources.
    
We believe that in deciding China’s economic growth adjustment we should fully consider the level of liberalization in China’s market economy, as well as its place in the global economy. 2002 saw China’s first growth period under conditions of a market economy and it was also the first growth period since it had joined the WTO. With the dual forces of market liberalization and globalization, China’s economic growth potential had reached a historical high.
    
Because regional governments will inevitably increase their growth projections, the risk of overheating becomes real once the rate pushes past ten percent. Resources become scarce, the environment buckles under pressure, and unfavorable structural changes emerge. Thus, from a regulatory standpoint, the target must be reduced slightly to take these into account. A nine percent growth rate reflects these cautions.
    
The final word will be had next march during the convening of the National People’s Congress. This target will be released in the form of a government report and will be the culmination of deliberation and input by interested parties from all over the country. No matter what happens, the current debate is still valuable as it allows us to be all the more sober when the time comes for fair policy to be made. 
    

Over the past few years our macroeconomic regulators have gained experience dealing with the risks of market liberalization. Tightening the reigns on the economy will not only preserve brisk growth, but will also ensure that the growth is positive. Our suggestion is a signal to central macroeconomic regulators that should be taken seriously.