China Targets 5% Growth Amid Economic Challenges

Quick Look

• Chinese Premier Li Qiang announced a 5% economic growth target for 2024.
• The goal emphasises transforming the development model despite risks from property sector instability and city debts.
• Policy measures include increased defence spending and a focus on technological self-sufficiency amidst a backdrop of cautious market reactions.

In an assertive move, Chinese Premier Li Qiang, at the National People’s Congress, articulated an ambitious economic blueprint for 2024. Despite the slowdown in post-COVID recovery, China aims for a 5% growth target, mirroring last year’s objective. This decision underlines Beijing’s commitment to fostering economic expansion over pursuing immediate structural reforms. Analysts, including Tao Chuan from Soochow Securities, note the heightened challenge of achieving this target given the increased base number from the previous year. The International Monetary Fund’s projection of China’s growth tapering to 4.6% in 2024 accentuates the ambitious nature of this goal.

China Cuts Deficit Goal to 3%, Eyes Stability

Li’s work report detailed fiscal adjustments to support the economic agenda. Noteworthy is the reduction of the budget deficit goal to 3% of GDP from last year’s 3.8%, alongside a strategic issuance of 1 trillion yuan in special ultra-long-term treasury bonds. Additionally, the local government special bond issuance quota has been slightly increased to 3.9 trillion yuan. Despite these measures, the announcement left Chinese stocks and the yuan relatively stable, suggesting a cautious market response. This fiscal strategy, paired with a consumer inflation target of 3% and a commitment to urban job creation, underscores China’s multipronged approach to maintaining economic stability and growth.

5% Growth Aim in Slow Recovery

The Congress also spotlighted China’s defence budget increase and a hardening stance on Taiwan, reflecting broader geopolitical considerations. Furthermore, Li’s announcement on lifting all foreign investment restrictions in the manufacturing sector and developing plans for quantum computing, big data, and AI indicates a pivot towards technological self-sufficiency. However, this move has drawn criticism from some quarters for potentially exacerbating industrial overcapacity and escalating trade tensions. Yet, it embodies China’s broader strategic intent to fortify its economic and technological sovereignty in the face of global uncertainties.

China’s economic targets for 2024, characterised by ambitious growth objectives and strategic fiscal policies, reflect its determination to navigate internal challenges and external pressures. While achieving a 5% growth in a slowing recovery environment poses a significant challenge, Beijing’s comprehensive policy framework aims to sustain momentum, ensuring resilience and progression towards long-term development goals. The unfolding year will test the efficacy of these measures amid the complexities of global economic dynamics and domestic vulnerabilities.

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