Chinese Premier Li Qiang on Tuesday announced an ambitious 2024 economic growth target of around 5%, promising measures to transform the country’s development model and neutralize risks fueled by bankrupt property developers and cities. indebted.
Presenting his work report at the annual meeting of the National People’s Congress, China’s parliament, Li also signaled an increase in defense spending while toughening rhetoric on Taiwan.
By setting a growth target similar to last year, which will be more difficult to achieve as the post-Covid recovery is losing momentum, Beijing is signaling that it is prioritizing growth over any reforms, even as Li promises new policies bold, analysts said.
“It is more difficult to reach 5% this year than last year because the base number has become higher, indicating that top leaders are committed to supporting economic growth,” said Tao Chuan, chief macro analyst at Soochow Securities.
Last year’s uneven growth highlighted China’s deep structural imbalances, from weak household consumption to increasingly low returns on investment, prompting calls for a new growth model.
China began the year with a stock market crisis and deflation at levels not seen since the global financial crisis of 2008-09. The housing crisis and local government debt problems persisted, increasing pressure on Chinese leaders to come up with new economic policies.
With admiration for China’s economic miracle quickly fading, some economists have drawn comparisons to Japan’s lost decades since the 1990s, calling for pro-market reforms and measures to boost consumer incomes.
“We must not lose sight of the worst-case scenarios,” Li said in the Great Hall of the People in Tiananmen Square.
“We have to move forward with transforming the growth model, making structural adjustments, improving quality and improving performance.”
However, there was no timeline or concrete details on the structural changes China intends to implement, and Li also emphasized stability as “the foundation of everything we do.”
Li acknowledged that achieving the target “will not be easy,” adding that a “proactive” fiscal stance and “prudent” monetary policy are needed. The goal considers “the need to increase employment and income and prevent and neutralize risks,” Li said.
The International Monetary Fund projects China’s growth in 2024 at 4.6%, slowing to 3.5% in 2028.
Chinese stocks .CSI300 and the yuan CNY=D3 were largely unchanged.
“Policymakers appear satisfied with the current trajectory,” said Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management.
“This is disappointing for those who expected a bigger boost… There is rhetorical support for local government debt and the real estate sector, but the key is how this is applied in practice.”
By Antoni Slodkowski, Andrew Hayley and Edward Baptista
2024-03-05 15:13:59