The danger here lies in the fact that excessively low

growth targets, based on excessively low estimates of potential growth, lead to lower actual growth. Fo

r an economy the size of China’s, a difference of even 1 percentage point has a huge impact on welfare.

Many economists would counter that a conservative growth target is useful-or even necessary-to create space for struct

ural adjustment. But this claim is unconvincing. Reducing China’s excessive reliance on investment in real es

tate-one of the economy’s most serious structural problems-does not necessarily require a reduction in FAI gro

wth, let alone GDP growth. Nor is slower GDP growth a prerequisite for improving financial stability.

China must pursue as high a growth rate as possible

In my view, because no one is sure what exactly China’s potential growth rate is, the best strategy is to try to achieve as high a g

rowth rate as possible, so long as it doesn’t worsen inflation and hinder structural adjustment.