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China drops GDP Target in the face of COVID-19

by Futures Centre, Aug 31
2 minutes read

In May 2020, China announced it would not be setting a 2020 goal for growth in Gross Domestic Product (GDP) growth for the first time in decades. The  reason for this was the great uncertainty posed by COVID-19 for the world economic and trade environment. Premier Li Keqiang said that the government would instead focus on stabilising employment and increasing living standards. This move is complemented by ongoing research in China into how a Gross Ecosystem Product (GEP) measure can complement GDP.

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So what?

The motivation behind the decision to abandon a GDP target is unclear, and its impact will depend on what other changes the Chinese government will take to support stability and living standards. Has the target been dropped temporarily as it would be difficult to set, or is China questioning the role of GDP as a measure of development and societal wellbeing?

GDP measures a country’s economic activity and has long been used as a signifier of national development, encompassing both economic and social progress. However, focusing exclusively on economic gain, it ignores the negative consequences of growth such as environmental degradation and climate change, and provides no insight into the mental and physical health and wellbeing of a nation.

China is also pioneering a new environmental accounting framework known as Gross Ecosystem Product (GEP) which attempts to assign an monetary value to the contribution of ecosystem services to human wellbeing. The use of GEP as a decision-making tool was demonstrated in a pilot project in Qinghai province, which contains the sources of the Mekong, Yangtze and Yellow Rivers.

Regardless of the true motivation, if China, one of the world’s superpowers, continues to eschew GDP as its primary measure it could open the door for a dashboard of measures such as GEP to provide a more holistic assessment of national success to drive investment in environmental protection and social welfare.

Photo by Nuno Alberto on Unsplash

 

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