China sets economic growth target of around 5%

China’s top leaders on Tuesday set an ambitious target for economic growth, but signaled only modest stimulus measures, not the aggressive support for China’s domestic economy that many analysts believe is necessary to stem a sharp decline in the property market. and alleviate consumer discomfort and investor caution. .

Premier Li Qiang, the country’s No. 2 official after Xi Jinping, said in his report to the annual session of the legislature that the government would aim for economic growth of “around 5 percent.” That’s the same goal China’s leadership set for itself last year, when official statistics ended up showing the country’s gross domestic product grew 5.2 percent.

The country’s program for state spending showed little change. Mr. Li said the central government deficit would be set at 3 percent of economic output, but that the government was willing to issue another $140 billion in bonds to pay for unspecified projects of national importance. The more the government borrows, the more it can spend on initiatives that could boost the economy.

China had also set the deficit at 3 percent early last year, before increasing it in October to 3.8 percent when the government approved $140 billion in additional bonds to pay for prevention and relief measures. disaster after severe summer flooding.

Conspicuously missing from the prime minister’s agenda for this year was a measure to shore up the country’s social safety net or introduce other policies, such as vouchers or coupons, that would directly address the very weak confidence of Chinese consumers and their unwillingness to spend money.

“There are many positive noises for the economy, but not many concrete proposals on how to solve the country’s growth difficulties,” he said. Neil Thomasmember of the China Analysis Center of the Asian Society.

Some economists question whether growth was really as high last year as China claims. Additionally, there was a modest rebound last year because strict “zero Covid” measures were in place until December 2022. Achieving the same growth this year, without the benefit of that rebound, could be much more difficult.

Consumers and investors have been skeptical about the prospects for a lasting recovery. China’s stock markets fell sharply in January and early February, before recovering in the past four weeks, as the government took steps to encourage stock buying. But Li maintained that China was on the right path.

China has “resisted external pressures and overcome internal difficulties,” Li told the National People’s Congress, a body controlled by the Communist Party that passes laws and budgets. “The overall economy is recovering.”

The National People’s Congress, a week-long choreographed event, typically focuses on short-term government initiatives, especially economic goals. China’s growth goal and the ways the government is trying to achieve it are under intense international scrutiny this year.

Communist Party leaders are trying to restore confidence in China’s long-term prospects and tap new growth engines such as clean energy and electric vehicles. Mr. Li’s report also noted new spending on artificial intelligence and a plan to “intensify research on disruptive and cutting-edge technologies.”

But those efforts could be slowed by a tangle of problems surrounding the real estate sector: a glut of apartments, debt-ridden real estate companies and local governments, and home buyers reluctant to invest money in real estate when values ​​are falling.

Achieving China’s growth target this year may be difficult without another big round of debt-fueled state spending. The amount in the report, said Eswar Prasad, an economist at Cornell University, “is not a huge amount for an economy the size of China, but I think they are being cautious about opening the taps too much before seeing whether this type of financing has the desired effect. effects.”

Economists and global credit agencies have long recommended that China strengthen its safety net, a change that could improve weak consumer confidence and persuade Chinese households to save less and start spending more.

But officials have been cautious about increasing social spending when they already need to figure out how to cope with an aging society with fewer workers to support each older person. China’s birth rate has almost halved since 2016 and about 15 percent of the population is 65 years or older – a figure that will likely rise to more than 20 percent by 2030.

In each of the last four years, China has retroactively revised its initial economic growth figures slightly downward. That makes it easier for the government to say next year that the economy has grown in line with official targets. But it does not solve the underlying economic problems.

China’s economy also faces strong forces from outside its borders. Government officials in the United States and Europe are working to contain Chinese trade practices that they consider unfair or threats to national security. And many multinational executives remain concerned about the increasing emphasis on internal security that Beijing has adopted during more than a decade of Xi’s rule.

The construction sector, the country’s largest industry, is in free fall after the bursting of a decades-long housing bubble over the past two years.

Home sales by the country’s 100 largest real estate developers plummeted 60 percent in February compared to the same month last year. Consumer confidence in China has not recovered after falling precipitously during the two-month Covid lockdown in Shanghai in 2022.

China’s best chance to maintain economic growth may be to further expand its trade surplus in manufactured goods, which already accounts for a tenth of the country’s entire economy. The Ministry of Commerce has been issuing directives this winter aimed at improving exports.

Southeast China’s Shenzhen, the hometown of BYD, the country’s top electric vehicle maker, issued 24 municipal directives last week to boost overseas car sales, particularly by helping the city’s companies buy more ships that can transport cars to distant markets.

But the United States and the European Union have expressed concern about job losses and have begun taking steps to limit trade with China. And falling prices in China mean that increases in the volume of the country’s exports may not translate into more money.

Vivian Wang contributed reporting from Beijing.