Beijing: China set a modest economic growth target for the year, a sign the nation's top leaders are still concerned about the recovery, given weak consumer confidence, declining exports and a housing market still under pressure.
Beijing will target gross domestic product expansion of around 5% for 2023, Premier Li Keqiang said in his final government work report to the National People's Congress "- the annual parliamentary gathering "- on Sunday. The budget deficit goal was set at 3% of GDP for this year, higher than last year's 2.8%.
The GDP target compares to last year's goal of around 5.5%, which China missed by a large margin after Covid outbreaks and restrictions, as well as the property crisis, dragged GDP growth to just 3%.
Economists surveyed by Bloomberg had projected Beijing would set a 2023 goal of higher than 5%. The median forecast is for growth to reach 5.3% this year.
The GDP target is a key indication of how China's leaders will shape economic policy for 2023 now that the country has abandoned its zero tolerance approach to Covid and is working to return to stronger growth. Economists are watching for clues on whether authorities will shift their stance on fiscal and monetary stimulus, which in turn could have implications for global commodity prices and growth.
"The number is on the conservative side," Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. "Because the Covid policy has been adjusted, there's no urgency for them to run another round of big economic stimulus."
Li's report suggests local governments may scale back major investments, given a smaller quota for special local bonds "- used mainly to finance infrastructure projects "- of 3.8 trillion yuan ($550 billion) for this year. The total quota last year was 4.15 trillion yuan, with local governments only issuing 4.04 trillion yuan of that.
The government will also allow the jobless rate to tick up, announcing a target of around 5.5% for this year, compared with under 5.5% for 2022.
China said its defense spending would grow by 7.2% this year "- the fastest pace since 2019. Military expenditure is expected to rise to 1.55 trillion yuan ($225 billion) in 2023, according the Ministry of Finance's annual report released Sunday at the start of the National People's Congress in Beijing.
Defends military budget
China's economic rebound this year is off to a solid start. The initial recovery was a bit cautious in January as a chaotic end to Covid restrictions caused a spike in infections and many businesses closed for the Lunar New Year holiday. Travel congestion has picked up since, and February manufacturing and services activity rebounded sharply.
Spending on the People's Liberation Army has increased by at least 6.6% each year for the past three decades, keeping pace or often exceeding economic growth, although the figure is far surpassed by the US's military expenditures.
"The increase in defense spending is needed for meeting the complex security challenges and for China to fulfill its responsibilities as a major country," said Wang Chao, spokesman of the National People's Congress, the country's top legislative body. He spoke at a press conference in Beijing on Saturday, a day before the official kickoff of the key political event.
China said it will target disorderly expansion in the property sector, as policy makers seek to strike a balance between boosting economic growth and defusing financial risks.
Efforts should be made to prevent "unregulated" expansion in the property market to promote its stable development, Premier Li Keqiang said at the annual session of the National People's Congress "- the Communist Party-controlled parliament.
The government also pledged to ensure "effective risk prevention and mitigation" in leading high-quality developers
Vows to control fossil fuels
China, the world's top clean energy market, will aim to "move faster to develop a new energy system," and plans to prioritize efforts to control fossil fuel consumption, according to a government work report.
Development targets for this year include "continued reductions in energy consumption per unit of GDP and in the discharge of major pollutants," the document said.
"We leveraged the role of coal as a major source of energy, increased advanced coal production capacity and stepped up support for power plants and heat-supply enterprises to ensure energy supplies," the report said.
Aims to increase grain output
China plans to increase grain production to more than 650 million tons this year, according to a government work report. The country also aims to keep grain acreage at stable level and promote production of oilseed crops, the report said.
Beijing has already suggested any further economic support would be limited. The People's Bank of China has vowed to refrain from using "flood-style" stimulus, likely meaning aggressive rate cuts aren't on the table this year. The finance minister has said fiscal conditions will gradually improve as the economy rebounds, and has promised that any expansion in fiscal expenditure will be moderate.
The economy's bounce-back has exceeded expectations among top leaders, Bloomberg reported earlier.
The state of the economy and its continued improvement will be of major significance to President Xi Jinping's new leadership team. As he charts his third term, Xi is expected to further consolidate the Communist Party's hold over the world's second-biggest economy, with a round of reforms expected to "have a major impact on economic and social development."
This year's NPC will also be the last for mainstays including Premier Li, with Xi ally Li Qiang, already the party's No. 2, expected to take his place.
A sustained economic rebound is far from certain, no matter how strong the recovery has been.
Export demand continues to languish, while the property market has yet to stabilize even with promising signs from home sales. Also key to the outlook will be how quickly business and consumer confidence can bounce back, with a complicating factor being continued US-China tensions over technology and geopolitics.