China sets economic growth target at about 5%

China's top leaders set an ambitious target for economic growth in 2024 as they tried to shore up confidence in an economy facing its biggest challenges in decades.

But they announced modest measures to stimulate growth, and refrained from the kind of bold moves that the business community had been looking for to address the real estate crisis, loss of confidence among Chinese households, and caution on the part of investors.

Premier Li Qiang, the country's second-ranking official after Xi Jinping, said in his report Tuesday to the legislature's annual session that the government would seek economic growth of “about 5 percent.” This is the same goal set by the Chinese leadership last year, when official statistics showed that the country's GDP recorded growth of 5.2%.

The central government's spending program showed little change. The fiscal deficit was set at 3% of economic inputs, the same target that was set early last year. Last year's deficit was eventually raised to 3.8 percent to accommodate more borrowing, something the government has indicated could happen again in 2024.

Deficits are important because the more a government borrows, the more it can spend on initiatives that can boost the economy.

Conspicuously absent from the Prime Minister's agenda this year was a move to shore up the country's social safety net or introduce other policies, such as vouchers or coupons, that would directly address Chinese consumers' very weak confidence and unwillingness to spend money.

“There are a lot of positive voices for the economy, but there are not many concrete proposals on how to solve the country’s growth difficulties,” he said. Neil ThomasFellow of the China Analysis Center of the Asian Society.

Some economists question whether growth was actually as high last year as China claims. In addition, last year saw a modest recovery because strict “no Covid” measures were in place until December 2022. Achieving the same growth this year, without benefiting from this recovery, may be more difficult.

Consumers Investors were skeptical about the prospects for a lasting recovery. China's stock markets fell sharply in January and early February, before rebounding over the past four weeks, as the government took steps to encourage stock buying. But Mr. Li stressed that China is on the right track.

Mr. Li told the National People's Congress, a Communist Party-controlled body that approves laws and budgets, that China had “withstood external pressure and overcome internal difficulties.” “The economy is generally recovering.”

The National People's Congress, an organized week-long event, usually focuses on near-term government initiatives, especially economic goals. China's growth target, and the ways the government is trying to achieve it, are under intense international scrutiny this year.

Communist Party leaders are trying to restore confidence in China's long-term prospects and harness new engines of growth, such as clean energy and electric cars. Mr. Lee's report also noted new spending on artificial intelligence and a plan to “step up research on revolutionary and frontier technologies.”

But these efforts could be stymied by a tangle of problems surrounding the housing sector: a glut of apartments, debt-ridden real estate companies and local governments, and a reluctance of homebuyers to invest money in properties when their values ​​decline.

Achieving China's growth target this year may be difficult without another large round of debt-backed government spending.

“I think they are being cautious about opening the taps widely before knowing whether this type of financing has the desired effects,” said Eswar Prasad, an economist at Cornell University.

Economists and global lending agencies have long recommended that China strengthen its safety net, a shift that could improve weak consumer confidence and persuade Chinese households to save less and start spending more.

But officials have been cautious about increasing social spending when they already need to figure out how to deal with an aging society with fewer workers to support each senior. China's birth rate has fallen by almost half since 2016, and about 15% of the population suffers from it. Age 65 or older – a number that is likely to rise to more than 20 percent by 2030.

In each of the past four years, China has retroactively revised its preliminary economic growth numbers slightly lowering its initial numbers. This makes it easier for the government to say the following year that the economy grew in line with official targets. But it does not solve the basic economic problems.

China's economy also faces powerful forces from beyond its borders. Government officials in the United States and Europe are working to contain Chinese trade practices that they consider unfair or threats to national security. Many multinational corporate executives remain wary of the ever-increasing emphasis on internal security and surveillance that Beijing has adopted during more than a decade of Mr. Xi's rule.

The biggest difficulty facing the economy lies in the huge construction sector, which is witnessing a sharp deterioration after the bursting of the decades-long housing bubble over the past two years.

Home sales by the country's 100 largest real estate developers fell by 60 percent in February compared to the same month last year. Consumer confidence across China has not recovered after falling sharply during Shanghai's two-month Covid lockdown in 2022.

Perhaps China's best chance to maintain economic growth is to expand its trade surplus in manufactured goods, which already represents a tenth of the country's entire economy. The Commerce Department issued guidance this winter aimed at boosting exports.

Shenzhen in southeastern China — the birthplace of BYD, the country's dominant electric vehicle maker — issued 24 municipal directives last week to boost overseas car sales, particularly by helping companies in the city buy more ships that can transport cars to markets. Far away.

But the United States and the European Union have expressed concern about job losses and begun taking measures to limit trade with China. Lower prices in China mean that gains in the actual volume of the country's exports and in China's share of global trade may not translate into more money.

Vivian Wang He contributed reporting from Beijing. You are mine, Claire Fu Amy Chang Chen contributed to the research.