China's controversial decision to omit an economic growth target for 2020 has drawn attention to what the government uses targets for.
On May 22, Premier Li Keqiang ended months of speculation over the annual target-setting ritual as he delivered the government's work report to the National People's Congress (NPC), China's top legislative body, in Beijing.
"I would like to point out that we have not set a specific target for economic growth this year," Li told the NPC deputies at their delayed session, originally scheduled for March 5.
"This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the COVID-19 pandemic and the world economic and trade environment," Li explained.
The references to uncertainty and unpredictability raised questions about the government's decades-old custom of issuing targets for gross domestic product growth, which the economy has almost invariably met.
While market economies accept uncertainties in forecasting as a function of risk and reward, central planning as practiced by the Communist Party of China (CPC) has tried to dictate pre-determined results.
In China's mixed economy, the government has gradually allowed market forces to operate with greater scope and influence over economic outcomes, but it has been unwilling to risk social instability or challenges to CPC control.
Aside from the threat to public health and the economic gains of the past 70 years, the COVID-19 crisis has pushed central controls to the breaking point, threatening to expose the government's GDP targeting as untenable or simply wrong.
Better to omit it altogether than to admit that target-setting has lost its relevance to the results, Li's statement implied.
The decision followed weeks of internal debate over whether to issue a numerical target for this extraordinary year or some "descriptive" guidance, according to Bloomberg News.
In response to reports that the skipped target was unprecedented, the government's top planning agency, the National Development and Reform Commission, said that GDP targets were previously omitted from work reports for 2000-2002, state media reported.
On death watch
But even without the challenge of the epidemic, the targeting exercise has been on death watch for years as GDP growth has slowed down.
In recent years, the government has loosened the link between annual GDP targets and official economic growth without completely abandoning the relic of the command economy.
In 2017, Li set the target of "around 6.5 percent," introducing a degree of uncertainty. Official GDP outperformed the approximate goal, posting a gain of 6.9 percent for the year.
In 2018, the government left the indefinite target unchanged as official growth slipped to 6.6 percent, the slowest pace in 28 years, but still within target.
Last year, the target range dropped to 6.0-6.5 percent while official GDP growth fell further to 6.1 percent.
But this year's stunning 6.8-percent plunge in first-quarter GDP cornered the target-setters, putting them in the predicament of predicting dismal results for the year.
"Those GDP targets have always been part forecast and part aspiration," said Gary Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics in Washington.
"The latest Wall Street forecasts indicate that annual Chinese growth in 2020 will be between 1 percent and 2 percent, not negative but nothing to brag about. So, I guess the leadership decided that, for political purposes, no target was better than a realistic low target," Hufbauer said.
At a press conference Thursday marking the close of the NPC session, Li said that China "is expected to achieve positive economic growth this year," if it fulfills tasks in key areas including job security, the official Xinhua news agency reported. But he stopped short of giving any stronger assurance or numerical goal.
Derek Scissors, an Asia economist and resident scholar at the American Enterprise Institute in Washington, agreed that the alternatives for setting a target have pushed the government into "a no-win situation."
"The most optimistic target they could choose would look both artificially high in the face of COVID-19 and starkly low by China's recent standards," said Scissors.
The outlook also put the government in the uncomfortable position of having to admit that it could not deliver on the longstanding CPC promise to double 2010 GDP by 2020, missing the goal by a wide margin.
According to Bloomberg estimates, the minimum needed for growth this year would be 5.6 percent at a time when, by the government's own reckoning, only 91 percent of small and medium-sized enterprises have gone back to work.
‘Moderately prosperous’
Although President Xi Jinping previously pressed the government to meet all its official targets for this year despite the pandemic, references to the decade of doubling have dropped from official statements in recent weeks.
The government is still tasked with the CPC promises to eliminate extreme poverty and build "a moderately prosperous society in all respects" by the end of the year.
The vague wording of the "moderately prosperous" criterion may allow the government to argue that it has met the intent of the double-GDP goal.
But the major purpose behind GDP targeting could be lost, leaving official economic statistics even less reliable than they are now.
"GDP growth targets have always been guidance to local authorities and companies for what to report," Scissors said.
In expansionary times, production centers took the national targets as a minimum for the annual growth figures submitted to the central government's National Bureau of Statistics (NBS).
Officials seeking advancement made sure that their regions outperformed the targets, leading to provincial totals that routinely exceeded the national GDP figures compiled by the NBS.
In bad times, industrialized provinces particularly in the northeast Rust Belt also felt pressure to overreport growth, adding to statistical fraud.
Investigations in 2015 and 2017 found widespread falsification of production, investment and income growth data, according to state media.
In 2018, the NBS said that figures were "severely fabricated" at 1,195 companies, or 58 percent of those inspected for "abnormal data," the official English-language China Daily reported at the time.
The NBS has made several efforts in the past decade to reform data collection and curb falsification at the local level.
In 2012, the agency ordered 700,000 enterprises to report their production data directly to Beijing in hopes of avoiding manipulation by local and provincial authorities.
Most recently last October, the NBS announced an extensive series of revisions to the basic data gathering and reporting law.
The amendments sought to hold officials and their supervisors directly responsible for data they submitted, threatening increased fines for fabrication.
‘Largely unexamined’
But the uncanny conformity of official GDP growth rates with government targets has been left largely unexamined, at least until now.
With the absence of an official GDP growth target to guide them for the first time, enterprises and local authorities may be entering a new and uncertain era for reporting results.
While the official second-quarter growth rate to be announced in July may be expected to show the first signs of a partial recovery, the reporting may be experimental as the provinces try to guess what the central government wants.
But old habits of central planning die hard. The lack of government guidance is unlikely to last for long, economists say.
"If the virus outlook improves sharply, then I suspect China will revert to announcing a target for 2021," said Hufbauer.
"I see no signs that Xi will do away with central planning. Quite the contrary. He is strengthening control from Beijing and the role of state-owned enterprises," he said.
A revival of target-setting could come even sooner.
"Growth targets will return," said Derek Scissors. "I wouldn't be surprised if there was an informal one publicized later for the second half of 2020."
"It's an integral part of their data management," Scissors said.