China's top leaders have set an ambitious economic growth target for 2024 as they seek to bolster confidence in an economy facing its biggest challenges in decades.
But they announced only moderate measures to stimulate growth, with the business community refraining from bolder measures in the face of an asset crisis, a loss of confidence among Chinese households and investor wariness.
Premier Li Keqiang, the country's No. 2 official after Xi Jinping, said in his statement to the annual session of the legislature on Tuesday that the government expects economic growth of “around 5 percent.” Official figures show the country's gross domestic product grew by 5.2 percent, the same target set by China's leadership last year.
There is little change in the central government's spending plan. The fiscal deficit was pegged at 3 percent of economic input — the same target as at the start of last year. Last year's deficit was eventually raised to 3.8 percent to accommodate further borrowing, which the government signaled could happen again in 2024.
Deficits are important because the more the government borrows, the more it can spend on initiatives that can boost the economy.
Also conspicuously absent from the prime minister's agenda for this year is raising the country's social safety net or introducing other policies, such as vouchers or coupons, that would directly address Chinese consumers' weak confidence and reluctance to spend money.
“There are a lot of positive noises for the economy, but no concrete plans on how to solve the country's development difficulties,” he said. Neil ThomasA fellow at the Asia Society's Center for China Analysis.
Some economists question whether last year's growth was really as high as China claims. Additionally, last year brought a modest rebound as strict “Zero Covid” measures were in place until December 2022. Achieving the same growth this year, without the benefit of that recovery, may be more difficult.
Consumers And investors remain skeptical about the prospects for a sustained recovery. Stock markets in China fell sharply in January and early February before recovering in the past four weeks as the government moved to encourage stock purchases. But China is on the right track, Mr.
China has “withstood external pressures and overcome internal difficulties,” Mr. Li told the National People's Congress, which approves laws and budgets controlled by the Communist Party. “The economy is generally recovering.”
The National People's Congress, a weekly event, usually focuses on the government's near-term initiatives, especially economic objectives. China's growth goals, and the ways the government is trying to achieve them, have come under intense international scrutiny this year.
Communist Party leaders are trying to restore confidence in China's long-term prospects and harness new drivers of growth, such as clean energy and electric vehicles. Mr. Li's report flagged new spending on artificial intelligence and plans to “accelerate research into disruptive and frontier technologies.”
But those efforts could be dragged down by a tangle of problems surrounding the housing sector: apartment complexes, debt-ridden property companies and local governments, and homebuyers reluctant to sink money into real estate when values fall.
Achieving China's growth target this year may be difficult without another big round of debt-fueled state spending.
“I think they're cautious about opening the pipeline wide before they see if this kind of financing has the desired effect,” said Eswar Prasad, an economist at Cornell University.
Economists and global lending agencies have long recommended that China strengthen its safety net, which could boost weak consumer confidence and enable Chinese households to start saving less and spending more.
But when they already have to figure out how to cope with an aging society with fewer workers to support each senior, the authorities are keen to increase social spending. China's birth rate has halved since 2016 and accounts for 15 percent of the population Age 65 or older – a number that could grow by more than 20 percent by 2030.
In each of the past four years, China has revised its initial economic growth numbers back slightly. It makes it easier for the government to say next year that the economy has grown in line with official targets. But that doesn't fix the underlying economic problems.
China's economy faces strong forces from outside its borders. Government officials in the United States and Europe view Chinese trade practices as unfair or national security threats. And with the ever-increasing emphasis placed on homeland security and surveillance by many executives at multinational corporations, Beijing has more than a decade of Mr. Accepted in Shi's reign.
The economy's biggest strain is in the broader construction industry, which has been in a nosedive over the past two years after bursting a decades-long housing bubble.
Home sales by the nation's 100 largest real estate developers fell 60 percent in February from the same month last year. In 2022, consumer confidence across China did not recover after falling sharply during Shanghai's two-month Covid lockdown.
China's best chance of maintaining economic growth may be to further expand its trade surplus in manufactured goods, which already represents about one-tenth of the entire country's economy. The Commerce Ministry is issuing directives aimed at boosting exports this winter.
Shenzhen in southeast China — the hometown of BYD, the country's dominant electric vehicle maker — issued 24 municipal orders last week to boost overseas car sales, specifically helping companies in the city buy more ships that can transport cars to distant markets.
But the United States and the European Union have expressed concern about job losses and have begun taking measures to restrict trade with China. And as prices in China fall, gains in the physical size of the country's exports and China's share of world trade may not translate into much cash.
Vivian Wang Contributed reporting from Beijing. Li Yu And Claire Fu Research contributed.
