On the morning of March 5th, Premier Li Keqiang delivered the annual government work report at the opening meeting of the fourth plenary session of the 12th National People’s Congress, pointing out that the GDP is expected to grow at 6.5% to 7% in 2016, which indicates that China has set a clear-cut range for its economic growth. What is the significance of this expected goal? Is it beneficial enough to China, and in turn, to the world?

Firstly, the expected GDP growth rate of 6.5% to 7% accords with the “target and requirement” of the medium and long-term economic development in China. It is proposed in the 13th Five-Year Plan that in order to complete the building of a moderately prosperous society in all aspects by 2020 and achieve the aim to double the 2010 GDP and per capita income of residents in cities and rural areas by 2020, China’s GDP must grow at an average annual rate of at least 6.5% in the next five years, which is also an inexorable requirement of achieving the Two Centenary Goals. This year, more flexible and accurate policies will be adopted to ensure the GDP growth rate of at least 6.5%.

Secondly, the expected GDP growth rate of 6.5% to 7% accords with the “need and possibility” of the economic development in China. Premier Li points out in the government work report that in setting a projected growth rate of 6.5% to 7%, we have taken into consideration the need to finish building a moderately prosperous society in all aspects and the need to advance structural reform. It will also help to guide market expectations and keep them stable. The aim of maintaining stable growth is primarily to ensure employment and promote people’s wellbeing and a growth rate of 6.5% to 7% will allow for a relatively full employment. Here, by “need” is meant that the improvement of people’s livelihood and employment requires maintaining a stable economic growth; by “possibility” is meant that the restriction of the resources and environment, and the policies to curb inflation restrain the economic growth. Therefore, the upper limit of GDP growth rate of 7% is appropriate for both the need of saving energy and protecting the environment, and the need of improving employment and curbing inflation.

Thirdly, the expected GDP growth rate of 6.5% to 7% leaves a room for the flexible macro regulation of the Chinese government. 2016 marks the beginning of the 13th Five-Year Plan and the deepening of structural reform. On the one hand, China’s economy is still largely resilient, with enormous potential and ample room for growth. It still has a solid supporting foundation for a sustainable growth. The structural adjustments are being advanced smoothly, and the economic development still has an overall trend for the better. On the other hand, China’s economy is definitely faced with various challenges and problems at present. There are great difficulties in the process of adjusting the economy to a “new normal”. The world economic and financial structure is experiencing complicated and profound changes. There is an increasing downward pressure on and uncertainties in the world economy. Under the circumstances, the setting of the GDP growth rate makes it possible for the Chinese government to regulate the economy flexibly and helps the Chinese government to adopt more flexible, accurate, effective and timely regulation policies to strike a balance between maintaining economic growth, increasing employment, improving people’s livelihood and curbing inflation, preventing risks, adjusting structure, protecting environment, etc.

Fourthly, the expected GDP growth rate of 6.5% to 7% ensures that the contribution of China’s economy to the world economy will not decrease. In terms of absolute increments, China has such a large size of economy that the growth at every 1% will double the increase of its contribution to the world economy. In 2015, the contribution rate of China’s economy to the world economy exceeded 25%, coming out in front. This year if the expected growth rate of 6.5% to 7% is realized, the contribution rate of China’s economy to the world economy will still reach or exceed 25%. As is noted in a comment in Nikkei Asia Review, the high expected GDP growth rate of 6.5% to 7% in 2016 may to some extent relieve the gloomy global market. The positive message sent by China’s economy during the “two sessions” in 2016 will give a strong boost to the global economic development.

Note: The author is a special commentator of People’s Daily, Director of the Research Institute of Finance and Economics, and a professor in the School of Economics and Management at Tongji University. This article first appeared in People’s Daily on the following website: https://paper.people.com.cn/rmrbhwb/html/2016-03/06/content_1659002.htm