China has set an economic growth target of “around 5%” for 2023
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This year is going to be tougher on the global economy than the one we have left behind, the International Monetary Fund’s (IMF) chief Kristalina Georgieva has warned.
“We expect one third of the world economy to be in recession,” she said, adding that even for countries that are not in recession: “It would feel like recession for hundreds of millions of people.”
The next couple of months will “be tough for China, and the impact on Chinese growth would be negative,” Georgieva said, adding that she expects the country to move gradually to a “higher level of economic performance, and finish the year better off than it is going to start the year.”
China is aiming for economic growth of “around 5%” this year, and will take steps to catalyze a rebound after stalling under the weight of strict COVID controls last year, according to the country’s outgoing premier.
All Asian leaders start with the question of what is going to happen with China. Will China return to a higher level of growth? she said.
The recovery is going to be very painful after Beijing ended Covid restrictions in December.
Both figures for the coming year were released at the opening of the annual gathering of the National People’s Congress (NPC), the country’s rubber-stamp legislature, which draws nearly 3,000 delegates to Beijing for the next eight days.
The outgoing premier, Li Keqiang, told delegates at the opening of the congress on Sunday that the economy was staging a steady recovery and showing potential for further growth.
The economy added more than 12 million urban jobs last year, with the urban unemployment rate falling to 5.5%, according to the work report, which emphasized China’s focus on ensuring stable growth, employment and prices amid global inflation and set the GDP target.
The 7.2% increase in planned defense spending marks the first time in the past decade that the budget growth rate has increased for three consecutive years, as Beijing continues to modernize and build-up its military, while asserting pressure on Taiwan – the self-governing island democracy the Chinese Communist Party claims as its own despite never having ruled.
The military spending has increased for the second year in a row and this year has been even more of a boom, as tensions rise and a regional arms race begins. The figure stays below the symbolically significant double-digit expansion, as it has each of the past few years.
In his work report, Li said that the armed forces should intensify military training, be more prepared, devote more energy to training under combat conditions, and make well-coordinated efforts to strengthen military work.
The GDP target and military spending are among the most closely watched in the opening day proceedings, with the GDP target figure in particular being monitored this year as China emerges from its economically draining zero-Covid policy. The new figure appears modest against what some analysts had predicted could be a more robust aim for the year ahead.
The yearly meeting of China’s National People’s Congress is a key political event that accompanies a gathering ofChina’s top political advisory body.
The first two sessions have been held since October, when the leader of the Chinese Communist Party,Xi Jinping, secured a third term. Xi is set to enter his third term as President, a largely ceremonial title, during the congress.
China’s factories had their best month in over a decade in February, underscoring how quickly economic activity has recovered after the Covid exit wave. The construction and services industries had their best two-year performance.
Moody’s Investors Service has since raised its China growth forecast to 5% for both 2023 and 2024, up from 4% previously, citing a stronger than expected rebound in the short term.
The target of around 5% announced Sunday might be a reflection of the analysts predictions of a difficult track to recovery for China.
The International Monetary Fund predicted in January that the global economy would weaken this year as rising interest rates and the war in Ukraine weigh on activity. The global economy is projected to slow from 3.4% in 2022 to 4.9% in just nine years.
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China is set to release its import and export data for the first two months of this year on Tuesday, which will provide a glimpse into demand for global trade.
Li is likely to be departing along with a generation of Western educated, reform-minded officials who have influenced economic policy making over the past 10 years. The new team, tipped to be composed of Xi’s close associates, faces the tough task of reviving the economy.
The Chinese economic team will be challenged by a number of challenges, including a historic downturn in real estate, sluggish consumption, rising unemployment, and tension with the United States over technology sanctions.
“China’s defense expenditure as a percentage of GDP has remained stable over the years. It’s stable, but not as stable as the world average.
The target is slightly lower than last year’s goal of “around 5.5%”, which was set before the Omicron variant of COVID-19 started to challenge the government’s “zero COVID” policy, leading to mass lockdowns, forced quarantines and a sharp drop-off in economic activity.
This year is essential to prioritize economic stability and pursue progress. Li told the opening ceremony of the National People’s Congress that policies should be kept consistent and targeted in order to create synergy.
The meetings involving about 3,000 delegates from across the country are a chance for delegates to get a look at upcoming legislative proposals and to review the year’s achievements.
State of the Union: China’s economy under the scrutiny of the nation’s economic and political leadership in a “slow-growth” economic climate
Wang Chao, China’s parliamentary spokesman, said that the budget increase this year was “moderate and reasonable” and that it was responding to complex security challenges in the world.
Li also re-hashed old language on Taiwan, suggesting that China’s attitude towards the self-governed island has not changed, with Beijing preferring to “re-unify” with the island peacefully rather than by use of force.
“We must persist in implementing the Party’s overall strategy for resolving the Taiwan issue,” he said. “It is necessary to promote economic and cultural exchanges and cooperation between the two sides of the strait.”
For the most part, Li’s speech — a kind of “state of the union” delivered to the National People’s Congress — focused heavily on the economy, an area of policy that he has nominally been in charge of since 2013.
He said reform and opening should be deepened and the government should increase market confidence, which has been hurt by harsh “zero carbon” policies that have hurt other sectors of the economy, such as tech, education, and real estate.
Perceived as marginalized by Chinese leader Xi Jinping in recent years, Li will be formally stepping down during the congress as part of the biggest shake-up to the country’s economic leadership in a decade.
Xi ally Li Qiang, a former Communist Party boss in Shanghai and neighboring coastal provinces, is widely expected to get the job, in an appointment that many see as part of Xi’s efforts to consolidate his grip on power as he embarks on a rare third term as state president. The two families are not related.
In his speech on Sunday, Li Keqiang repeated calls for the government to prioritize the expansion of domestic demand, something that economists say is necessary to push China’s economy beyond its reliance on investment.
China has a lowest GDP growth target in decades, which shows the domestic and global challenges the country still faces despite its decision not to introduce anti-covid measures.
“Insufficient demand is still a prominent issue,” Li said Sunday. Stabilizing employment is difficult. Some local governments are having to contend with fiscal difficulties.
China is in the midst of a downturn in its housing market. Consumer spending is sluggish. Unemployment remains high among the youth.
In a message rarely heard from top officials, Li hinted in his address to the nation at rising public discontent about the government, calling on the country’s policymakers to “face up to the issues and do its best to improve the government’s work.”
There was a rare show of dissent against the ruling Communist Party after anger over its zero-covid policy erupted across the country. Last month, protests occurred in the central city of Wuhan and northeastern city of Dalian as hundreds of elderly confronted local officials to oppose changes to their health insurance, which had cut their medical benefits significantly.
Beijing’s 5% growth target is conservative but pragmatic about the economy in the foreseeable future, according to the finance ministry’s latest budget report
The government’s 5% growth target indicates that they’re conservative, but pragmatic about the economy in the foreseeable future, which would include weakness in global demand and a still-moderate recovery in the housing sector.
The leaders are sticking to their slower GDP growth path, which will be gradual, since they declared the end of the epidemic.
The final report released by Li had a goal to create around 12 million jobs in towns and cities this year, up from the previous goal of at least 11 million.
Beijing will also allow local governments to issue up to 3.8 trillion yuan ($550 billion) in special bonds in 2023, which will help them build 5G networks, railways, airports and other infrastructure projects, Li added.
She said the government was too high in its fiscal deficit last year, which made it less able to fund infrastructure spending.
The growth of fiscal spending is higher than the growth of 5.6% this year, according to the premier.
According to the finance ministry’s latest budget report, local government revenue is expected to grow by only 0.4% this year, an indication of Beijing’s conservative forecast on land sales.
Local governments have relied heavily on land sales in the past as a source of revenue but those receipts contracted by 23% in 2022, dealing a blow to finances already strained by huge Covid spending.
It could be more desirable for governments to get fiscal resilience after three years of pandemic measures, said analysts from Citi.
They said that the government work report provides no hint of huge fiscal or monetaryStimulus.
The economy needs more policy support and the central bank will not resort to flood-like stimuli as it tries to strike a balance between boosting growth and ensuring price stability.
