Chinese Premier Li Qiang (李強) yesterday announced an ambitious economic growth target of about 5 percent for this year, promising steps to transform the nation’s development model and defuse risks fueled by bankrupt property developers and indebted cities.
Li was delivering his maiden work report at the annual meeting of the National People’s Congress, China’s rubber-stamp parliament.
In setting a growth target similar to last year, which would be harder to reach as a post-COVID-19 pandemic recovery is losing steam, Beijing signals it is prioritizing growth over any reforms even as Li pledged bold new policies, analysts said.
Photo: AFP
“It’s more difficult to achieve 5 percent this year than last year because the base number has become higher, indicating that the top leaders are committed to supporting economic growth,” Soochow Securities chief macro analyst Tao Chuan said.
Last year’s uneven growth laid bare China’s deep structural imbalances, from weak household consumption to increasingly lower returns on investment, prompting calls for a new growth model.
China started the year with a stock market rout and deflation at levels unseen since the global financial crisis of 2008-2009. The property crisis and local government debt woes persisted, increasing pressure on China’s leaders to come up with new economic policies.
“We should not lose sight of worst-case scenarios,” Li said in the Great Hall of the People in Tiananmen Square.
“We must push ahead with transforming the growth model, making structural adjustments, improving quality and enhancing performance,” he said.
However, there was no timeline or concrete details for the structural changes China intended to implement, with Li also emphasizing stability as “the basis for everything we do.”
Li acknowledged that reaching the target “will not be easy,” adding a “proactive” fiscal stance and “prudent” monetary policy was needed.
The target considers “the need to boost employment and incomes and prevent and defuse risks,” he said.
The IMF projects China’s growth at 4.6 percent for this year, declining toward 3.5 percent in 2028.
Adding to the challenges, the 3 percent inflation target announced at the National People’s Congress means the country is aiming for nominal growth of about 8 percent again this year.
In reality, China is battling the longest period of deflation since the late 1990s, meaning the economy only expanded 4.6 percent last year, before adjusting for inflation. With prices still falling, a strong expansion would be hard to achieve.
Additional reporting by Bloomberg
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