China Aims for 5% Economic Growth Amidst Challenging Times
Beijing, China – Premier Li Qiang Sets Ambitious Goal
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China’s Premier Li Qiang declared on Tuesday that the country is determined to achieve a 5% economic growth rate this year, acknowledging the difficulties it may face in the current global circumstances. The announcement was made during the annual session of the National People’s Congress, where Li outlined several plans aimed at fostering advanced technology development, strengthening China’s military capabilities, and providing support for the economy among other longstanding objectives. However, no large stimulus package was revealed to further boost markets and alleviate investor concerns.
Li stressed the government’s commitment to maintaining a “pro-active fiscal policy and prudent monetary policy,” indicating consistent economic leadership approaches. He also shared a plan to issue long-term bonds over the upcoming years, starting with 1 trillion yuan ($139 billion) in 2022. The funds secured through this initiative will contribute to the implementation of major national strategies and the enhancement of security measures in key areas.
A New Development Model to Revitalize the Housing Market
Li revealed a new development model for China’s housing market that includes the construction of government-subsidized housing. This endeavor seeks to mitigate the prolonged real estate slump that has remained a significant drag on the economy. Reports suggest that public funds will be utilized to purchase unoccupied apartments and convert them into affordable housing options, aligning with the government’s plans.
Li warned that China’s sustained economic recovery remains unstable due to insufficient effective demand, overcapacity in certain industries, weak social expectations, and several risks and hidden dangers. In the government’s draft budget, 1.67 trillion yuan ($231 billion) has been allocated for defense spending, reflecting a 7.2% increase and indicating continued security and economic focus.
Rising Economic Challenges Amid Economic Transformation
China’s economy experienced a 5.2% growth rate in 2023, following a modest 3% growth in 2022 when the COVID-19 pandemic led to widespread lockdowns and business closures. However, achieving a similar growth rate this year poses a greater challenge as the economy starts from a higher base. Despite China’s relatively ambitious 5% growth target, it should be noted that this rate would still be considered robust when compared to advanced economies, such as the United States. In the past, China witnessed double-digit growth during its transition into a global manufacturing powerhouse.
Li acknowledged the difficulty in achieving this year’s targets, not limited to economic growth, but also encompassing income growth, job creation, and energy efficiency reforms to align with climate goals. In light of the government’s unmet target for a 2% reduction in energy consumption in 2023, China has now set a goal of a 2.5% decrease.
President Xi Jinping’s Leadership in Focus
President Xi Jinping, a dominant figure in Chinese politics, has placed trusted allies such as Premier Li in top positions to reinforce the Party’s grasp on the economy and society. Xi, currently in his third five-year term and potentially holding the position for life, has strengthened his leadership through these appointments. The annual National People’s Congress meetings, which span around a week, serve as the country’s major political events. While policies are endorsed rather than established during the congress, it provides a platform to showcase the party’s accomplishments and garner support for its objectives.
Authorities have emphasized the importance of boosting consumer spending to stimulate economic growth. However, the anticipated consumption-led recovery, which emerged after the relaxation of anti-pandemic measures in late 2022, has diminished. Several forecasts predict a slowdown in growth this year due to declining housing prices and job concerns. The real estate market is currently in crisis following major defaults by developers following a crackdown on excessive borrowing.
Addressing Challenges and Inspiring Confidence
Li assured that the government will address potential risks and support local governments facing economic difficulties resulting from high spending on pandemic measures and decreased revenue from land sales. He emphasized the importance of considering worst-case scenarios while evoking a sense of confidence. Li highlighted China’s enormous market of approximately 1.4 billion people, advanced manufacturing capabilities, and a vast workforce, which are fundamental factors that will continue to underpin economic recovery and long-term growth.
Furthermore, Li outlined numerous initiatives in his report, intending to promote worry-free consumption this year. Encouraging households to trade in old cars and appliances supports this objective. Addressing the pressing concern of employment, plans include unemployment insurance, social support, loans, and subsidies for companies generating substantial job opportunities.
The government also intends to extend support to financially strained local governments dealing with economic difficulties, protecting cities and regions challenged by mounting debt burdens.
