China set a modest 5% growth target for this year as it opened the annual session of its National People’s Congress (NPC), which is set to implement the biggest government shake-up in a decade.
Last year, the economy put in one of its worst performances in decades, growing by only 3% as a result of three years of COVID controls, a crisis in the vast property sector, and a crackdown on private enterprise.
Outgoing Premier Li Keqiang emphasized the importance of economic stability and expanding consumption in his work report, setting a goal of creating around 12 million urban jobs this year, up from at least 11 million last year, and warning that risks remain in the real estate sector.
Li set a budget deficit target of 3.0% of GDP, up from around 2.8% last year.
“Global inflation remains high, global economic and trade growth is slowing, and external attempts to suppress and contain China is intensifying,” Li said in his opening speech to the parliament, which will run until March 13.
“At home, the foundation for stable growth needs to be consolidated, insufficient demand remains a pronounced problem, and the expectations of private investors and businesses are unstable,” he said.
This year’s growth target is at the low end of expectations, as policy sources had recently told reporters a range as high as 6% could be set. It is also below last year’s target of around 5.5%.
Alfredo Montufar-Helu, Beijing-based head of the China Center at the Conference Board, said setting a higher growth target would have required massive stimulus and “exacerbated the structural imbalances that China is trying to deal with to achieve its long-term development goals.”
The lower target is more achievable, he said, and “recognizes that the Chinese economy will be dealing with significant economic headwinds this year”.
China’s state planner said it aims to increase the incomes of low earners and bring more people into the middle-income group. The planner unveiled measures to spur consumption but stopped short of direct spendings, such as cash handouts.
To bolster growth, the government plans to stick with its playbook of spending on infrastructure, increasing funding for big-ticket projects with 3.8 trillion yuan ($550 billion) in special local government bonds, up from last year’s 3.65 trillion yuan.
The 67-year-old Li and a slate of more reform-oriented policy officials are set to retire during the congress, making way for loyalists to President Xi Jinping, who further tightened his grip on power when he secured a precedent-breaking third leadership term at October’s Communist Party Congress.
During the NPC, former Shanghai party chief Li Qiang, 63, a longtime Xi ally, is expected to be confirmed as premier, tasked with reinvigorating the world’s second-largest economy.
The rubber-stamp parliament will also discuss Xi’s plans for an “intensive” and “wide-ranging” reorganization of state and Communist Party entities, state media reported on Tuesday, with analysts expecting a further deepening of Communist Party penetration of state bodies.
Military Budget Rise
Li said China’s armed forces should devote greater energy to training under combat conditions and boost combat preparedness, and the budget included a 7.2% increase in defence spending this year, a slightly bigger increase than last year’s budgeted 7.1% rise and again exceeding expected GDP growth.
On Taiwan, Li struck a moderate tone, saying China should promote the peaceful development of cross-Strait relations and advance the process of China’s “peaceful reunification”, but also take resolute steps to oppose Taiwan’s independence.
Beijing faces multiple challenges including increasingly fraught relations with the United States, which is trying to block its access to cutting-edge technology, and a worsening demographic outlook, with plunging birth rates and a population drop last year for the first time since the famine year of 1961.
China plans to lower the costs of childbirth, childcare, and education and will actively respond to an aging population and a decrease in fertility, the nation’s state planner said in a work report released on Sunday.
The NPC opened on a smoggy day amid tight security in the Chinese capital, with 2,948 delegates gathered in the cavernous Great Hall of the People on the west side of Tiananmen Square.
During the session, China’s legislature will vote on a plan to reform institutions under the State Council or cabinet, and decide on a new cabinet line-up for the next five years, according to a meeting agenda.
It is the first NPC meeting since China abruptly dropped its zero-COVID policy in December, following rare nationwide protests. Excluding the pandemic-shortened meetings of the previous three years, this year’s session will be the shortest in at least 40 years, according to NPC Observer, a blog.
($1 = 6.9048 Chinese yuan renminbi)
