China is targeting economic growth of around 5% in 2023, one of the lowest targets in decades.
Chinese Premier Li Keqiang revealed the plan on Sunday at the opening of the National People’s Congress, China’s artificial parliament that meets until March 13 in Beijing.
The conservative target comes as Beijing seeks to revive the world’s second-largest economy after its “no COVID” policy of lockdowns, mass testing and quarantines lapsed last year.
What are the reasons for China’s modest economic outlook in 2013?
China’s economy officially grew 3 percent in 2022, well below the 5.5 percent target, as tough pandemic restrictions, a slumping housing market, a government crackdown on private businesses and a trade war between the United States and China hampered growth.
Except for the 2020s, when the coronavirus turned the world economy upside down, the last year of economic growth was the lowest since 1976, the last year of Mao Zedong’s Cultural Revolution.
Although China’s economy appears to be making a strong recovery from the pandemic (manufacturing activity in February, for example, beat expectations and expanded at the fastest pace in more than a decade), Chinese officials have warned of risks ahead.
Recognizing China’s “enormous potential and importance for further growth,” Li noted the growing “suspiciousness of the external environment,” including high inflation and “foreign efforts to suppress and contain China,” a thinly veiled comparison to the intensity of geopolitical competition in the country. with us.
The Chinese economy is also facing serious long-term challenges at the national level, including a huge housing bubble and a declining labor force due to the birth rate.
Many economists believe that China’s high-growth era, decades of double-digit annual expansion, is a thing of the past.
In a report issued in March last year, Australian think tank Lowy Institute predicted that China’s economy will grow at least 2-3 percent every year until 2050, doubting the long-term assumptions that China will catch up with the United States. Mauris a eros terlus. . coming in luster.
Opening the National Assembly, where the ruling Communist Party will elect its leaders for the next five years, Li said Beijing would not be too burdensome on the government’s coffers to stimulate growth, stressing the need to increase private consumption. items.”
Li said the government would target a fiscal deficit of 3 percent of GDP by 2023, up from 2.8 percent last year.
Li is also heavily targeting job creation, setting a target of 12 million new jobs in 2023, up from a target of 11 million jobs in 2022.
“In my opinion, they are managing expectations,” Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis in Hong Kong, told Al Jazeera.
“If you look at the details, they are announcing less private government bond issuance, because they have made a lot of priority and they don’t want to create a budget deficit.”
The modest target may also be part of a larger economic mood that prevailed at the Central Labor Economic Conference, the largest annual economic conference, in December, said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.
“The global outlook was more difficult at the time, as the United States and Europe were on the edge of recession,” Zhang told Al Jazeera.
“China’s economic recovery is not even clear. Given the reshuffling of the state, the main question in the coming months is to watch how the new leaders will increase confidence in the private sector. This is bigger than fiscal and monetary policies, in my opinion.
Will China achieve its growth target?
Most economists believe China can achieve, and possibly exceed, 5 percent growth by 2023, especially as the economy emerges from a low base last year.
“It’s not the best part or much to fuel growth,” ING Financial Group said in a note. This is more about long-term growth. In our opinion, achieving these objectives will not be very difficult.
Beijing’s goal should be seen as “growth that the government wants to take,” said Zhang of Pinpoint Asset Management.
“In fact, given the very low base of economic activity last year, it is very likely that growth will be below 5 percent,” he said. “There is no fiscal stimulus from the National People’s Congress, which is not surprising because the economic recovery is already on the right track.”
Garcia Herrero of Natixis said China’s economy will “probably” expand by more than 5 percent this year.
“I would say they know the economy is not going to grow at eight percent or something like that, but certainly around five,” he said.