China signals a strong target for economic growth
China’s top leaders set an ambitious growth target on Tuesday as the Chinese economy suffers from a steep housing market decline, consumer slump 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 about 5 percent. That’s the same goal China’s leaders set last year, when official statistics showed the country’s gross domestic product growing 5.2 percent.
Some economists question whether growth was as high as China claims. Furthermore, last year brought a modest recovery as strict ‘zero Covid’ measures were in place until December 2022. Achieving the same growth this year, without the benefits of that recovery, could be much more difficult.
Consumers and investors were skeptical about the prospects for a sustainable recovery. Stock markets in China fell heavily in January and early February before recovering over the past four weeks as the government took steps to encourage stock buying. But Mr Li claimed China was on the right track.
China had “resisted external pressure and overcome internal hardships,” Mr Li told the National People’s Congress, a Communist Party-controlled body that approves laws and budgets. “Overall, the economy is recovering.”
The National People’s Congress, a week-long choreographed event, typically focuses on the government’s short-term initiatives, especially economic goals. China’s growth target and the ways in which 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 leverage new growth engines such as clean energy and electric vehicles. Mr Li’s report also flagged new spending on artificial intelligence and “improving cutting-edge and frontier technology research”, according to Xinhua.
But those efforts could be held back by a tangle of problems surrounding the housing sector: a glut of apartments, indebted real estate companies and local governments, and homebuyers reluctant to put money into real estate as values fall.
It may be difficult to achieve China’s growth target this year without another big round of debt-fueled government spending. Achieving annual growth of around 5 percent “will require decisive, comprehensive and coordinated policy support,” HSBC economists said on Friday.
Vivian Wang contributed reporting from Beijing.