China has pegged its economic growth target at 6.5% in 2017, which will be a tad lower than last year. Gross domestic product (GDP) grew 6.7%, the slowest in 26 years, but within the government's target of 6.5-7%. There has been a deceleration in China's growth, which was in double digits till 2010, and is impacting overall global growth. A 6.5% growth rate during 2017 will mean that India will remain the fastest growing major economy in the world with the International Monetary Fund projecting 7.2% expansion during 2017-18. It had cut the forecast for the current financial year to 6.6%, a shade lower than China's 6.7%, due to the expected impact of demonetisation. Central Statistics Office estimates, however, suggest that growth has not been significantly dented due to scrapping of old Rs 500 and 1,000 notes and the economy is expected to grow by 7.1% in 2016-17.
In China's case, the government has sought to rework the growth model from an export-led strategy to one that involves some tough decisions to strengthen its financial system. In January, IMF's World Economic Outlook had identified a severe slowdown in China as one of the risks to global economic recovery. Chinese premier Li Keqiang gave himself some difficult and politically sensitive tasks of reducing steel and coal production - which will result in heavy job losses in China and impact global commodity prices.
He ordered steelmakers to reduce steel production by an additional 50 million tonnes in 2017 after local manufacturers were forced to accept a production cut of 65 million last year. The government is also asking coal mines to decrease production by an additional 150 million tonnes this year over and above the production cut of 290 million tonnes effected in 2016. But he has few alternatives in a situation because overcapacity in certain industries and high inventory of millions of unsold houses is beating down economic growth.
