China’s Premier Wen Jiabao sent a shockwave through the global economy this week when he lowered the country’s GDP growth target for 2012, to 7.5% from 8%. In doing so, Wen was not only recognizing the tremendous headwinds China is facing from an uncertain global economy. He was also acknowledging that China needs to alter its growth model if the country’s economic miracle is to continue. Here are some comments from his Monday address, courtesy of state-news agency Xinhua:
Here I wish to stress that in setting a slightly lower GDP growth rate, we hope to make it fit with targets in the 12th Five-Year Plan, and to guide people in all sectors to focus their work on accelerating the transformation of the pattern of economic development and making economic development more sustainable and efficient, so as to achieve higher-level, higher-quality development over a longer period of time.
To ensure success in all our work this year, we must uphold the theme of scientific development, take transforming the pattern of economic development as the main thread, adopt a holistic approach and coordinate all our work. We must coordinate efforts to achieve steady growth, control prices, adjust the economic structure, improve people’s well-being, implement reform and promote harmony.
To be honest, I’ve had trouble figuring out why everyone got their underwear in a bunch over these comments. Sure, a slowing China would have negative implications for a global economy still suffering from the ill effects of the Great Recession and the ongoing sovereign debt crisis in Europe. Yet we should look at Wen’s statements with two key points in mind: First, the reality is China needs to slow its economy down. Secondly, China’s leadership shows no sign of allowing that to happen, no matter what nice speeches Wen might make. And that’s where the real threat to the world economy can be found.