The Chinese government revealed a five percent economic growth target for 2023 on Sunday, the lowest target it has set in decades.
China's economic growth rate fell to its second-lowest since the 1970s in 2022, only growing by around three percent. Outgoing Chinese Premier Li Keqiang, who announced the new target, noted that the modest figure followed several years of anti-COVID lockdowns that kept millions of citizens in their homes, significantly obstructing economic activity.
"We should give priority to the recovery and expansion of consumption," Li said.
The National People's Congress (NPC) witnessed the government plans and announcements for 2023 in the Great Hall of the People, Beijing. While the meeting housed over 2,977 NPC members, their primary function was to agree to initiatives decided by the Communist Party. The party members will attend the Congress until March 13.
While certain sectors like manufacturing and construction have expanded rapidly since China's reopening, the Chinese economy is still fragile. Government officials received numerous reports of concerns surrounding outside circumstances, likely leading to the conservative target for 2023.
China said its economy would grow around 5 percent this year, vowing a recovery after reversing Covid controls that stifled growth. https://t.co/Mc360M53a2— The New York Times (@nytimes) March 5, 2023
"The language today suggests that Beijing believes the reopening boost is likely to be only temporary. The policy push is to spend just enough to reach the 5% growth target," China economist Louise Loo said.
Li also noted various other circumstances that contributed to the modest targeting decision. For example, he cited "uncertainties in the external environment" like global inflation as a concern in addition to "external attempts to suppress and contain China."
Growth amid turmoil
Much of the NPC meeting centered on the Chinese economy's need for self-reliance, emphasizing the importance of private consumption and limiting reliance on Western technology. The new government is facing weakening exports and increasingly demanding U.S. tariff prices as 2023's primary economic challenges.
Li mentioned plans to increase average household income for consumer spending, noting the need to create more jobs for the future economy. The government is aiming for over 12 million jobs in cities across China in 2023, up from the 11 million job target last year.
Li also explained that he would not rely on government bonds or financial stimulants to boost the economy. The government has increased expectations for this year's fiscal deficit, up from 2.8 percent in 2022 to three percent in 2023, relative to the country's gross domestic product.
Global asset managers may be disappointed with China's economic outlook, writes @shuli_ren https://t.co/vCktDqU5uy via @opinion— Bloomberg (@business) March 5, 2023
"To my mind, they are managing expectations. If you look at the details, they are announcing less issuance of special government bonds because they did a lot of front-loading and they don't want to make a budget deficit," Hong Kong economist Alicia García-Herrero said.
Other financial analysts note that the current goals were likely influenced by pessimistic outlooks in late 2022. Last December, China's annual Central Economic Working Conference saw global downturns as a red flag for the future of China's economy, coupled with governmental shifts in the coming NPC elections.
However, as China's various economic sectors continue to grow, many financial analysts believe that the country will be able to achieve its modest 2023 goals. Pinpoint Asset Management economist Zhiwei Zhang said that the government's current goals would be the lowest it can expect and that the Chinese economy will likely rebound to greater lengths.
China has announced a 7.2% increase in its defense budget for the coming year, just one tenth of a percent higher than in 2022. The 2023 figure was given as 1.55 trillion yuan ($224 billion). https://t.co/WFnkgfrsHP— The Associated Press (@AP) March 5, 2023