Quick Bites | China sets ambitious growth target

China will target economic growth of about 5% this year, a rate described as “ambitious” by analysts, as the world’s second-largest economy battles challenges ranging from a property slowdown to weak investor confidence.

Premier Li Qiang, President Xi Jinping’s number two, announced a budget deficit of 3% of GDP and $140 billion in special government bonds in his report to the annual meeting of China’s parliament on Tuesday 5 March.

China will target an unemployment rate of 5.5% and inflation of 3% for 2024, Li said. Beijing’s military budget will increase 7.2%, the same as last year. But now the country faces persistent deflation, with consumer prices falling at the fastest annual rate in 15 years in January.

Deflation in China

Source: Wall Street Journal


The targets were in line with market expectations. China’s official economic growth targets have been trending lower over the past decade as policymakers have sought to unwind the country’s debt-fueled growth model.

But analysts say that the 2024 target — which is the same as last year’s — would be harder to achieve than in 2023. China’s economy expanded 5.2% last year, a subdued rate by its standards, and is expected to slow further as a drawn-out real-estate collapse crushes investment and wary consumers rein in spending. Capital Economics thinks annual growth will slow to around 2% by 2030.

Beijing is seeking to engineer an economic turnaround by investing money into factories, especially for semiconductors, aerospace, cars and renewable-energy equipment, and selling the resulting surplus abroad. But weak demand and overcapacity means Chinese producer prices have been falling for 16 months, led by consumer and durable goods, food products, metals and electrical machinery.

Geopolitics won’t help. Unlike in the early 2000s, the Western world now sees China as its chief economic rival and geopolitical adversary. The EU is considering whether Chinese-made electric vehicles are unfairly subsidised and should be subject to import restrictions. Donald Trump, who is favoured by betting sites to win the presidency in November, has hinted at hitting imports from China with tariffs of 60% or higher.

Such protectionism might shift some of the deflationary impact to other parts of the world, as Chinese exporters look for new markets in poorer countries, such as in the Middle East, Africa and South America. Unlike Japan or South Korea, which abandoned low-cost manufacturing as they progressed to higher-value exports, China has maintained a dominant position in low-cost sectors even as it pushes into products typically held by the advanced economies.