China set a modest economic growth target for this year of around 5 percent, according to a government work report, at the start of the annual session of the National People’s Congress (NPC) on Sunday, which will launch the biggest government overhaul in a decade.
In a document, outgoing Premier Li Keqiang said it was essential to prioritize economic stability, setting a goal of creating about 12 million urban jobs this year, up from last year’s target of at least 11 million.
China’s gross domestic product grew just 3% last year, one of its worst results in decades, weighed down by three years of COVID-19 restrictions, a crisis in its vast real estate sector, a crackdown on private enterprise and weakening demand for Chinese exports.
Li set a budget deficit target of 3.0 percent of GDP, up from 2.8 percent last year.
“Global inflation remains high, global economic and trade growth is losing steam, and external attempts to suppress and contain China are intensifying,” Li said during his opening speech in parliament, which runs until March 13.
“Domestically, the foundations for stable growth need to be consolidated, insufficient demand remains an acute problem, and expectations of private investors and businesses are unstable,” he said.
This year’s target, around 5%, is at the lower end of expectations. Political sources had recently told Reuters that a range of up to 6% could be set, and the target is lower than last year’s target of around 5.5%.
Alfredo Montufar-Helu, director of the Beijing Conference Board’s China Center, said setting a higher growth target would have required massive stimulus and “exacerbated the structural imbalances China is trying to resolve to achieve its long-term development goals.”
The lower target is more within reach, he said, and “recognizes that the Chinese economy will face significant stumbling blocks this year.”
The Chinese state planner said his goal is to increase incomes of low-income incomes and bring more people into the middle-income group, for which he announced stimulus to consumption, although he stopped short of offering direct expenses, such as cash distribution.
To boost growth, the government plans to continue its infrastructure spending line, increasing financing for major projects with 3.8 trillion yuan ($550 billion) in special local government bonds, up from 000.3 trillion yuan last year.
Li, 67, and a group of more reformist political officials will retire during the congress, making way for those loyal to President Xi Jinping, who further tightened his grip on power when he secured an unprecedented third term at October’s Communist Party Congress.
During the assembly, former Shanghai party chief Li Qiang, 63, an ally of Xi, is expected to be confirmed as prime minister, tasked with revitalizing the world’s second-largest economy.
Parliament will also discuss Xi’s plans for an “intensive” and “wide-ranging” reorganization of state entities and the Communist Party, media reported on Tuesday. Analysts expect greater penetration of the Communist Party into state bodies.
INCREASED MILITARY SPENDING
Li said China’s armed forces should devote more energy to training in combat conditions and increase readiness for confrontation.
The budget includes a 7.2% increase in defense spending this year, a slightly larger increase than last year’s budget of 7.1%, and again higher than expected GDP growth.
On Taiwan, Li struck a moderate tone, stating that China should promote the smooth development of cross-Strait relations and advance China’s process of “peaceful reunification,” but also take resolute measures to oppose Taiwan’s independence.
Beijing faces multiple challenges, including increasingly strained relations with the United States, which is trying to block its access to cutting-edge technology, and a deteriorating demographic outlook, with a falling birth rate and a decline in population last year for the first time since the 1961 famine.
China plans to reduce the costs of childbirth, childcare and education, and will actively respond to the aging population and declining fertility, the state planner said in the work report released Sunday.
The NPC opened on a day of smog and heavy security in the Chinese capital, with 2,948 delegates gathered in the Great Hall of the People on the west side of Tiananmen Square.
During the session, the Chinese legislature will vote on a plan to reform the institutions of the State Council, or cabinet, and decide on its new composition for the next five years, according to the meeting’s agenda.
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