China’s Ambitious 5% Growth Target Criticized as Lacking a Concrete Plan

China has set an ambitious growth target of about 5% for this year, aiming to boost confidence in the world’s second-largest economy. However, analysts have noted the absence of detailed strategies from Premier Li Qiang to achieve this goal amidst China’s significant challenges.

During the annual parliamentary session on Tuesday, China’s second-highest official reaffirmed the previous year’s growth objective, signaling Beijing’s intention to stabilize the economic slowdown. This marks only the second time in a decade that Beijing has not reduced its main economic target, with the previous occurrence in 2018 amid the US trade war.

Although Premier Li emphasized the need for support across various sectors, his report to the legislature lacked substantial fiscal measures. It maintained a stable government deficit without aggressive steps to stimulate consumption or address the real estate crisis. The issue of China’s longest price decline streak since the 1990s remained unaddressed.

Beijing seems to rely on reviving confidence in the private sector and households. President Xi Jinping encouraged the support of private firms in a meeting with Jiangsu province delegates, as reported by Xinhua news agency.

A press conference scheduled for Wednesday with central bank Governor Pan Gongsheng and other senior officials might provide further details. However, the traditional premier’s annual press briefing was canceled.

China’s economy, worth $18 trillion, has been decelerating for over a decade, with growth averaging just above 4% in the past two years. This slowdown aligns with President Xi’s focus on technological self-sufficiency and national security alongside economic expansion. Major stimulus measures, particularly through the property market and local government debt, are being avoided.

The growth target for this year is considered aggressive, especially given the higher comparison base with 2023. Tsinghua University Professor Li Daokui, a former government advisor, suggests that more aggressive policies are needed to promote consumption.

The government has set an unprecedented urban job creation target of over 12 million for the year, but detailed policies to achieve this are yet to be announced. Measures to encourage consumption include support for trading in old vehicles and electronic products.

Officials are directed to focus growth on ‘new productive forces,’ referring to high-tech industries, but concerns remain about neglecting traditional sectors and potential deflation and trade tensions.

The central government plans to continue issuing long-term sovereign bonds to support infrastructure spending. However, the broad fiscal deficit is expected to remain the same as in 2023, with only a 1% increase in total fiscal spending projected for 2024.

Beijing remains cautious about debt sustainability, mindful of international concerns. The budget reserves policy room for potential risks and challenges and indicates the possibility of additional stimulus measures later in the year.