China Sets Ambitious Growth Goal In Push To Boost Confidence
Premier Li Qiang is set to officially unveil the annual goal for gross domestic product while delivering his first work report to the national parliament, which kicks off Tuesday.
(Bloomberg) -- China set its annual growth target at around 5%, raising expectations for the nation’s top leaders to unleash more stimulus as they try to lift confidence in an economy hampered by a property slump and entrenched deflation.
Premier Li Qiang acknowledged the challenges facing the world’s second-largest economy as he delivered his first work report to the national parliament at its opening Tuesday. “It is not easy for us to realize these targets,” he told thousands of delegates assembled at the Great Hall of the People in Beijing. “We need policy support and joint efforts from all fronts.”
The gross domestic product target matches last year’s figure, which economists polled by Bloomberg before the National People’s Congress expected Beijing to repeat in 2024 despite a higher base of comparison. Analysts in a separate, broader survey forecast the economy would likely expand by 4.6% this year, underscoring the challenges facing policymakers as they try to resist big stimulus.
China’s most high-profile annual political meeting comes as President Xi Jinping tries to restore faith in an economy grappling with a prolonged real estate crisis and headwinds from its geopolitical rivalry with the US. Investors have called for stronger action, as foreign executives continue to recoil from the world’s second-largest economy.
“Beijing is setting a status quo GDP target in a down market to project confidence and slow the downward economic spiral,” said Drew Thompson, a former Pentagon official and a senior fellow at the Lee Kuan Yew School of Public Policy in Singapore. “Without major consumer-centric stimulus or market liberalization policies foreign businesses in China will continue to face challenges.”
The yuan was little changed both onshore and offshore on Tuesday morning after key targets were announced at the annual gathering of China’s top legislative body. The onshore yuan has fallen about 1.4% against the US dollar this year on a wide rate differential between China and the US and amid the Asian giant’s slowdown.
China also unveiled plans to issue 1 trillion yuan ($139 billion) of ultra-long special central government bonds this year. Such issuance, a rare move for Beijing, is also planned for the coming years in order to support key national strategies, the report says.
Bloomberg News earlier reported that authorities were considering issuing 1 trillion yuan of these types of bonds to fund projects. The move marks only the fourth such sale in the past 26 years, with the most recent one in 2020 when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures.
China’s set its official target for the fiscal deficit at 3%, despite a mid-year expansion to 3.8% in 2023. That move showed authorities are “balancing growth and risk prevention,” according to Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc.
“The deficit will continue to be mostly shouldered by the central government, which will step up transfer payment to local governments to help prevent and resolve local debt risks,” he added.
Xi’s mantra that “housing is for living in, not speculation” was omitted from the report for the first time since 2019, as top leaders try to stabilize a property market that once drove about a quarter of GDP. That phrase has consistently been used by officials since 2016, and became an important way for Beijing to signal its intention to cool an overheating market.
Li’s report delivered to thousands of delegates from across the nation of 1.4 billion people will be scoured for clues on authorities’ plans for fiscal and monetary stimulus, which could impact global commodity prices and inflation. The premier has previously signaled authorities won’t rely on massive stimulus to spur expansion as they try to break the country’s reliance on debt-driven growth.
The extent to which China’s economic expansion is reached or spread across the entire economy is increasingly difficult to ascertain independently given greater restrictions on data accessibility, said Chong Ja Ian, an associate professor of political science at the National University of Singapore.
China on Monday abruptly scrapped a three-decade tradition for the premier to hold a press conference at the NPC, a platform that offered a rare chance for the public to interact with a top leader and learn more about economic decisions. That move will likely fan investor fears about transparency that is already denting confidence in policymaking in China.
Premier Li’s report offered no major surprises that would move the needle on shifting sentiment or lifting expectations for big supportive measures, analysts said.
“I don’t expect sentiment to see a huge boost as the authorities’ message remains largely unchanged,” said Alex Loo, macro strategist at TD Securities. “No big stimulus package given debt concerns and an intention to keep growth steady and sustainable.”
--With assistance from Yujing Liu, Rebecca Choong Wilkins, Wenjin Lv, Iris Ouyang, James Mayger, Colum Murphy and Lucille Liu.
(Updates throughout.)
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