| There are starkly different ways of looking at China's momentous decision to scrap its economic growth target for the year, a move that was revealed at the opening of the National People's Congress on Friday. The most optimistic interpretation is that Beijing has belatedly concluded that this relic of Soviet central planning threatens the development of a truly market-led economy. China was the only major economy that set hard growth targets; most nations simply try to forecast the rate, relying on market mechanisms to get there. China's adherence to targets promoted what the official Xinhua News Agency once called "GDP worship," a devotion to growth at all costs that encouraged massive borrowing by local governments to meet—or better yet, exceed—the national target by investing in highways and bridges and other infrastructure. This is the root of China's soaring debt problem, one that has skewed the economy toward state-run industrial behemoths that have privileged access to bank capital. It's also helped wreck the environment. This week in the New Economy  Chinese President Xi Jinping arrives at The Great Hall of the People for the opening of the National People's Congress on May 22. Photographer: Andrea Verdelli/Getty Images AsiaPac The economist Michael Pettis argues that Chinese GDP is no longer a measure of national output. Rather, it measures input—how much money the state decides to spend to achieve a certain quantum of growth. In this kind of accounting, white elephant projects can make ambitious local officials look good, so long as they push up the growth rate. Waste is an economic virtue. If China is abandoning the pretense that real growth can be bought with bank loans, it could signal the start of a reform push. In this scenario, Covid-19 will be the trigger that liberates the private sector, redirecting bank lending to far more productive enterprises run by China's frustrated entrepreneurs, while bringing to heel local governments whose reckless borrowing and spending threatens the country's financial stability. All this would encourage foreign investors who've been ground down by the U.S.-China trade war and alarmed by the way the coronavirus has exposed the fragility of China-based supply chains. It also would have the bonus of reducing friction with the U.S. and other trading partners.  Li Keqiang, premier of the People's Republic of China, at the Boao Forum for Asia Annual Conference 2019. Photographer: Qilai Shen But there's another possible explanation for turning away from the gods of GDP—one with grimmer overtones for Beijing. Dropping the target could be a sign of desperation. Not a shift away from state-directed investment, but a temporary capitulation to dire economic realities. Faced with collapsing international demand, the government may have decided to abandon the effort to prop up growth—even if some of it was illusory—and let gravity take over. A Bloomberg survey of economists predicts Chinese growth this year at 1.8%, the lowest level since the 1970s. That would all but extinguish President Xi Jinping's cherished hope of announcing a doubling of per capita income over a decade, to coincide with the centenary of the founding of the Chinese Communist Party in 2021. So which is it? Premier Li Keqiang wasn't giving much away by saying the decision to scrap the target was made "because our country will face some factors that are difficult to predict." Certainly, there's no evidence that China is scaling back its statist ambitions to dominate the industries of the future. On the contrary, it's planning to pump more than $1 trillion into a long-term effort to roll out everything from wireless networks to artificial intelligence. And any positive message that China's rubber-stamp parliament may have been sending to the world by dropping GDP targets has now been swamped by its hard-line stand over Hong Kong. The End of Hong Kong? When the Hong Kong government proposed an extradition law that would send detainees across the border to face mainland magistrates, millions of local residents flooded the streets in pro-democracy demonstrations. Now, Chinese law is coming to Hong Kong. With China's decision to impose national security legislation on the territory, it is signaling that the "one country, two systems" principle won't stand in the way of its effort to crush a local revolt that poses an unprecedented challenge to Beijing. The sudden escalation may mean he is willing to pay a high price to reassert control: Capital may flee, talent may drain away, and foreign companies may relocate to Singapore or Manila. Along with the new law will come enforcers: Article 4 of the "draft decision," unveiled at the National People's Congress, states that "when needed, relevant national security organs of the Central People's Government will set up agencies in [Hong Kong]."  Last year was the year of protests in Hong Kong. Photographer: Anthony Wallace/AFP Xi is clearly in crisis mode. Although his economy is in a tailspin, he appears ready to sacrifice the territory where corporate China raises capital and does global deals to preserve his authority. And it seems he's willing to risk an escalation of his Cold War with the U.S. in the process. Covid-19 provided political cover for this move: would-be democracy protestors in Hong Kong are mostly sheltering at home. But summer will bring them out again. The risk of a violent backlash is real. "This is the end of Hong Kong," said Dennis Kwok, an opposition lawmaker representing the legal sector. "I foresee that the status of Hong Kong as an international city will be gone very soon." Bloomberg New Economy Conversations Did you miss this week's live virtual event on the race to find a coronavirus vaccine? You can watch the replay of the discussion here. You can also visit our website to explore upcoming events and register to join our next conversation on June 3, when we explore the impact of the pandemic on emerging markets. Follow Bloomberg New Economy on Twitter @neweconforum . __________________________________________________________ Like Turning Points? Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close. See what everyone is talking about. Get the day's top trending stories on social media, delivered to your inbox from QuickTake by Bloomberg. Download the Bloomberg app: It's available for iOS and Android. 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