On Jan. 20, the National Bureau of Statistics in China announced its 2015 GDP growth rate: 6.9% - making it the lowest in the past 25 years. Mar. 5 was when China’s prime minister Mr. Li revealed that the target growth rate in 2016 would range between 6.5% and 7%.Several press organizations were inquisitive about the news: did China truly have a 6.9% growth in 2015? Why is China still so obsessed with its GDP growth rate? Will a target growth rate benefit the Chinese economy or harm it? As claimed by reporters from The Economist, China’s GDP should stand for “Grossly Deceptive Plans”, and a target growth rate is established for political interests of the Communist party.Regardless of whether people believe in its validity or gravity, they still emphasize on this single piece of data. However, no matter the number itself is 6.5 or 6.9, the interpretation of the number, rather than the number itself, is the key to understand the Chinese economy.The decreasing growth rate is a signal: the Chinese economy is going through a transformation. Over the past few decades, there were several major parts contributing to China’s miraculous GDP growth: government expenditure, manufacturing and heavy industry. However, the proportion of the GDP which is created by these parts has been shrinking continuously in recent years due to urbanization, loss in comparative advantages, and environmental concerns, amongst other factors. To keep the economy in good standing the government is trying to implement a reform which focuses on the quality of the economy instead of its scope. Namely, setting a target of 6.5% growth rate doesn’t mean wasting resources to produce commodities which nobody deems necessary. That said, the question concerns the ways in which the Chinese should sustain the growth and quality of the economy.In China’s 13th Five-Year Plan, some problems are prioritized and explicitly stated. These include excess capacity and moral hazards of some state-owned enterprises. As proposed by some researchers, there are several ways to solve the problems.The first one is to export the excess productivity. As China is actively developing “The Silk Road Economic Belt” and “The 21st-Century Maritime Silk Road”, China hopes to increase its exports to other developing countries. In addition, the newly-founded Asian Infrastructure Investment Bank provides all member countries with great opportunities of getting additional finances.The second problem is about the state-owned enterprises. State-owned enterprises in China have not been exposed to a competitive market. This, in turn, triggers inefficiency. A line between the public and private ownership should be drawn, so the companies are pushed to be innovative and responsible for their own loss.The third one is to improve the quality of domestic products, which is also referred to as “reform on the supply side.” The purchasing power of Chinese people is strong, but people prefer to buy imported goods because the domestic goods are of superior quality. If the standard of domestic goods was improved, domestic consumption could be stimulated.Starting to solve these problems would be the first step of the reform, but the implementation of the reform takes time. In the year of 2016, I hope the improvements mentioned above can be gradually carried out. When people around the world see China as a strong, responsible and innovative country, the figure of GDP growth rate won’t matter that much anymore.This article was written by Sophie Li. Please send an email to [email protected] to get in touch. Photo Credit: Arshaun Darabnia