China’s top leaders have set an ambitious goal for economic growth by 2024 as they try to boost confidence in an economy facing its biggest challenges in decades.
But they announced only modest measures to stimulate growth, avoiding the kind of bold steps the business community is looking for to address a property crisis, a loss of confidence among Chinese households and caution. of investors.
Premier Li Qiang said, the No. 2 official of the country after Xi Jinping, in his report on Tuesday to the annual session of the legislature that the government will seek economic growth of “around 5 percent.” That’s the same target set by China’s leadership last year, when official statistics came out showing the country’s gross domestic product grew by 5.2 percent.
The central government’s spending program showed little change. The fiscal deficit is set at 3 percent of economic input — the same target as early last year. Last year’s deficit was later raised to 3.8 percent to accommodate more borrowing, something the government has warned could happen again in 2024.
The deficit is important because the more the government borrows, the more it can spend on initiatives that could boost the economy.
Noticeably missing from the premier’s agenda and budget documents released on Tuesday is a move to strengthen the country’s social safety net or introduce other policies, such as vouchers or coupons, that would directly respond to the extremely weak confidence of Chinese consumers and unwilling to spend money.
“There is a lot of positive noise for the economy, but not a lot of concrete proposals for how to solve the country’s growth difficulties,” said Neil Thomasa fellow at the Asia Society’s Center for China Analysis.
Some economists question whether growth was really as high last year as China claimed. In addition, last year brought a modest rebound as strict “zero Covid” measures were implemented until December 2022. Achieving the same growth this year, without the benefit of that rebound, may be more difficult .
Consumers and investors are skeptical about the prospects for a long-term recovery. Chinese stock markets fell sharply in January and early February, before recovering in the past four weeks, as the government took steps to encourage stock buying. But Mr. Li maintained that China is on the right track.
China has “withstood external pressures and overcome internal difficulties,” Mr. Li told the National People’s Congress, a Communist Party-controlled body that approves laws and budgets. “The economy usually rebounds.”
The National People’s Congress, a choreographed weeklong event, usually focuses on near-term government initiatives, especially economic goals. China’s growth goal, and the ways the government is trying to achieve it, have come under intense international scrutiny this year.
Communist Party leaders are trying to restore confidence in China’s long-term prospects and harness new growth drivers, such as clean energy and electric vehicles. Mr. Li’s report also flagged new spending on artificial intelligence and a plan to “boost research into disruptive and disruptive technologies.”
But those efforts could be dragged down by a tangle of problems surrounding the housing sector: a glut of apartments, debt-problems with property companies and local governments, and home buyers who are reluctant to sink money into real estate when values are falling.
Achieving China’s growth target this year may be difficult without another big round of bond-fueled state spending.
“I think they are cautious about opening the taps too wide before seeing if this type of financing has the desired effects,” said Eswar Prasad, a Cornell University economist.
Many local and provincial governments across China are struggling with heavy debts. Mr. Li said the central government would only allow a small increase of 2.6 percent in bond sales to help these governments.
Economists and international lending agencies have long recommended that China strengthen its safety net, a change that could improve weak consumer confidence and encourage Chinese households to save less and start spending more.
But officials are skeptical of increasing social spending when they have to figure out how to deal with an aging society with fewer workers to support every senior. China’s birthrate has been nearly stagnant since 2016 and about 15 percent of the population is age 65 or older — a number likely to grow to more than 20 percent by 2030.
Tao Wang, head of Asia economic research for UBS bank, said the government needs to do more to help the real estate market. Dozens of property developers have failed in the past few years, and rampant defaults “not only hurt developers but also homebuyers and their confidence,” Ms. Wang.
“They need to do more because the downward pressure on the economy remains serious,” he added.
China’s economy also faces powerful forces from outside its borders. Government officials in the United States and Europe are trying to contain Chinese trade practices they consider unfair or threats to national security. And many executives at multinationals remain troubled by the ever-growing emphasis on domestic security and surveillance that Beijing has adopted during more than a decade of Mr. Xi.
China’s military spending will expand by 7.2 percent in 2024 — the same percentage it rose last year — and reach about $231 billion, the new budget said. China has been increasing its military spending, now the second largest in the world after the United States, for decades. Washington approved a military budget of $886 billion for its most recent fiscal year.
The economy’s biggest difficulties lie in the vast construction sector, which has been in a nosedive after a decade-long housing bubble over the past few years.
Home sales by the nation’s 100 largest real estate developers fell 60 percent in February from the same month last year. Consumer confidence across China has yet to recover after falling sharply during Shanghai’s two-month Covid lockdown in 2022.
China’s best chance at sustaining economic growth may be to further expand its trade surplus in manufactured goods, which already represents a tenth of the country’s entire economy. The Ministry of Commerce is issuing directives this winter aimed at improving exports.
Shenzhen in southeast China — the hometown of BYD, the country’s dominant electric car maker — issued 24 municipal directives last week to boost overseas car sales, especially by helping companies in the city buy more ships that could transport vehicles to distant markets.
But the United States and the European Union expressed concern about job losses and began taking steps to limit trade with China. And falling prices in China mean that gains in the physical volume of the country’s exports and China’s share of global trade may not translate into more money.
Vivian Wang contributed reporting from Beijing. Li You, Claire Fu and Amy Chang Chien contributed research.
