China aims for 5% growth amid economic slowdown

China is poised to set its growth target for the year at about 5%, according to a government work report obtained by Bloomberg News. This growth target hints at the possibility of the government introducing more stimulus to boost the economy’s confidence, which is currently slowing.

Premier Li Qiang is expected to disclose the annual gross domestic product (GDP) goal during his inaugural work report to the nation’s Parliament, scheduled to start today, March 5. Achieving the same target as last year might prove challenging, considering 2024 does not benefit from the favourable comparison with the pandemic’s low base that amplified previous numbers.

In a poll conducted by Bloomberg before the National People’s Congress, almost all economists anticipated Beijing to declare a growth target similar to last year. However, a separate broader survey of analysts suggested that the economy is likely to grow at about 4.6% in 2024.

According to Drew Thompson, a former Pentagon official and a senior fellow at the Lee Kuan Yew School of Public Policy in Singapore, Beijing is setting a status quo GDP target in a down market to project confidence and slow the downward economic spiral.

“Without major consumer-centric stimulus or market liberalisation policies foreign businesses in China will continue to face challenges.”

Today, following the unveiling of the key targets, the yuan was scarcely altered at 7.2117 offshore. The onshore yuan has depreciated about 1.4% against the US dollar this year due to a broad rate disparity between China and the United States and the Asian behemoth’s slowdown.

China’s highest-profile annual political gathering comes at a time when President Xi Jinping is working to restore faith in an economy beset by a prolonged real estate crisis and entrenched deflation. Foreign executives continue to withdraw from the world’s second-largest economy, prompting investors to call for robust action.

Government policies

The government also revealed plans to issue 1 trillion yuan (US$139 billion) of ultra-long special central government bonds this year. This unusual move is expected to be spread across several successive years, as per the report.

Earlier, Bloomberg News reported that authorities were mulling over the issuance of 1 trillion yuan of these types of bonds to fund projects. This move marks only the fourth sale of this nature in the past 26 years. The most recent sale occurred in 2020 when authorities issued 1 trillion yuan worth of these bonds to cover pandemic response measures.

In addition, the government aims to cap unemployment at around 5.5% this year and intends to create more than 12 million urban jobs, as stated in the report. The budget deficit for China is forecasted at 3% of GDP for 2024, and Beijing also plans to increase defence spending by 7.2%.

Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc., commented on the 3% fiscal deficit, stating that authorities are balancing growth and risk prevention.

“The deficit will continue to be mostly shouldered by the central government, which will step up transfer payment to local governments to help prevent and resolve local debt risks.”

The report that Li will present to thousands of delegates at the Great Hall of the People in Beijing will also shed light on the authorities’ specific fiscal and monetary stimulus plans. These plans could potentially influence global commodity prices and inflation. China’s second-highest official has indicated that authorities will not depend on massive stimulus to drive expansion as they attempt to lessen the country’s reliance on debt-driven growth.

Chong Ja Ian, an associate professor of political science at the National University of Singapore, mentioned the increasing challenge in independently ascertaining the extent of China’s economic growth across the entire economy given greater restrictions on data accessibility, reported Bangkok Post.

In a surprising move, China has discontinued a three-decade tradition of the premier holding a press conference at the NPC, raising concerns about opaque policymaking.