China set a modest growth target of 7 per cent for next year and reduced the size of its annual fiscal stimulus package as government officials reiterated a need for economic growth to be balanced by progress in health care, education, environmental protection and social welfare. 

Ma Kai, minister at the State Development and Reform Commission, said that "economic development is not everything".

Officials said growth in 2004 was likely to exceed the 7 per cent target by some distance. In the first nine months of this year, gross domestic product expanded by an official 8.5 per cent and is forecast to maintain or exceed that rate for the whole year.

"My personal opinion is that growth in 2004 may be around the same as this year, or maybe just a little lower," said one senior official in a top economic ministry who declined to be named.

The target is in line with the government's goal of average 7 per cent annual growth between 2001 and 2005.

A growing number of independent economists use a range of proxy indicators to suggest that China's real growth rate this year considerably exceeds the official figure. They say that real GDP growth may have been around 10 or 11 per cent in the first nine months of the year.

Although Beijing is generally content with China's rapid growth, it is concerned that certain sectors such as property, autos, cement, steel and aluminium may be adding capacity too quickly. Policymakers also want to moderate the pace of credit growth.

With the aim of guarding against overheating in mind, the government is set to scale back its fiscal stimulus, planning to issue 110 billion yuan in special treasury bonds in 2004, down from 140 billion yuan this year. A total 600 billion yuan in bonds have been issued to fund mainly infrastructure investment over the past five years.

More of the funds raised from sale of the bonds are expected to go into environmental protection, education and social welfare, officials said.

Goldman Sachs recently upgraded its GDP forecast for China to 9.5 per cent for 2004 on the back of rising domestic demand.

(Courtesy to FT.com)

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