People's Daily 7% Editorial Signals CCP Will Break the Yuan to Reach 7% Growth

Liu Shan explains the signals given in the People's Daily 7% editorial. (See: People's Daily Marvels At Difficult to Achieve 7% Growth.

Fourth, the "Thirteen Five" plan to create a public opinion environment.

Politburo meeting has been explicitly discussed "Thirteen Five" planning in October plenary session of the central starting point plan is "building a moderately prosperous society", an important symbol of this task is to achieve the total national economy and per capita income doubled, then how the development of "Thirteen Five" reasonable period of economic growth, is planning highlights.

Some experts calculate, assuming that this year's economic growth rate reached 7 percent, so long as the next five years to achieve an average growth rate of 6.56% to complete the goal of doubling the economy. But taking into account the policy decision to leave room habits, maintain economic growth of about 7%, it should be an important option "Thirteen Five Year Plan". Deputy director of the Development Research Center of the State Council Wang Yiming, said, "if the effective release of growth potential through reform and innovation, China's economy not only in the present, but also in the coming period, with about 7% to maintain growth potential." This is actually passing a signal to the outside world, it plans to target the next five years is about 7%.

The purpose of this signal is released through official channels that guide public opinion in advance and avoid the "Thirteen Five Year Plan" put forward economic growth too much doubt. Can be judged, regardless of how the outside world think of China's economic and statistical data "13 Five Year Plan" economic growth will no doubt set at about 7%, this is both to ensure the task is completed, is expected to further stabilize the market.

If the realization of economic experts predict that China's economy to fully develop the potential for innovation and release, then the 7 percent economic growth really can become a reality. The key issue is whether to further promote the reform, civil innovative power can be fully tapped. Therefore, how to reform, when it is more important than economic growth issues.

Unless we're about to witness shock an awe in the area of economic reform, a hard target of 7% will only be achieved via inflation, which will send the yuan lower.

China's problem is it wants stability, but it cannot have stability everywhere and reform at the same time. Something has to give.

Exchange rate pressure from capital outflows, and outflows both the dollar rate hike expectations, but also with confidence in the Chinese economy related instability. Therefore, an important task is to stabilize the RMB exchange rate stable market confidence in the Chinese economy. This time, state media reports focused on macroeconomic topics, stability maintenance purpose is obvious.

In addition to a stable exchange rate, stable investor expectations are also important. The stock market in the national team after the shot, caught in a dilemma. The stock price, investors will throw stock, can be secured. Stock prices to fall, the national team had to sell to buy stocks. One to one to the market in the long and short battle, the evolution of investors and the national team of the game, to become a pure money game, have no resource allocation function.

Stable exchange rate, stabilize the stock market, even stable private investment confidence, it is a new subject steady economic growth. But economic stability maintenance scholar propaganda alone is not enough to give the market confidence, the government must first have faith, only to the Chief of the maintenance of stability in the stock market, as soon as possible to restore the functioning of markets, in order to reflect economic and market confidence in the government, and now the SFC many practices will be of precisely the opposite signal transfer.

iFeng: 第83期：官媒为何集中“系说”7%