China sets its GDP target at “around 5%” for 2023

BEIJING — China has set a growth target of “around 5%” for 2023, according to Premier Li Keqiang’s government work report released Sunday.

Analysts generally expected China to set a GDP target of more than 5% for 2023. The average growth forecast is 5.24%, according to CNBC analysis.

China has also set a target of 3% for the CPI, and an unemployment rate of 5.5% for people in cities – with around 12 million new jobs created in urban areas. This is more than last year’s target of “more than 11 million”.

The work report called for “prudent monetary policy” to be implemented in a “targeted” manner. The deficit-to-GDP ratio is expected to rise to 3% from 2.8% last year, the report said.

Li presented the report on Sunday at the opening of the National People’s Congress as part of the annual “two-sessional” parliamentary meeting. This is his last conference as prime minister.

The work report indicated the upcoming change in the leadership of the central government, with eight priorities for economic policy identified.

Stimulating domestic demand – from consumption and investment – came first, followed by improving the industrial system and supporting non-state-owned companies, according to the report.

Other priorities included “intensifying efforts to attract and utilize foreign investment,” “preventing and defuse financial risks,” stabilizing grain production, pursuing green development, and upgrading social programmes.

“We should strive to develop the digital economy, increase systemic supervision, and support the development of the platform economy,” the English-language report said.

Although it did not name specific companies, internet technology companies such as Alibaba typically fall under the “platform economy,” which has come under increasing scrutiny from Beijing in the past few years.

In real estate, the Labor report called for supporting people in buying their first homes and “helping solve housing problems for new and young urbanites.”

“We must ensure the effective prevention and mitigation of risks in leading high-quality real estate enterprises, help them improve debt-to-asset ratios, and prevent unregulated expansion of the real estate market to promote the stable development of the real estate sector,” the report said.

The slump in the huge real estate sector weighed on China’s economic growth last year. Beijing has cracked down on developers’ heavy reliance on debt for growth in 2020.

Bruce Pang, chief economist and head of research for Greater China at JLL, said China’s real estate policy will likely support the reasonable financing needs of high-quality real estate firms, and direct them toward areas of sustainable growth.

On the other hand, he said in Mandarin translated by CNBC that developers “who cannot take the initiative to complete business modification and transformation are naturally purged by the market.”

China’s GDP rose just 3% last year in a rare miss of the national target.

The country had set a growth target of around 5.5% for 2022. But Covid controls, including a two-month lockdown in Shanghai, and a real estate slump, have slowed growth.

This year, the two sessions are also set to formalize the government titles of the new prime minister, deputy prime ministers and heads of various ministries. This year’s National People’s Congress is scheduled to end on March 13.

“Given the complete reshuffle of the government, the main issue to watch in the next few months is how the new leaders will boost private sector confidence,” said Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management. “This is more important than fiscal and monetary policies, in my opinion.”