April 24, 2024
Economy

China sets challenging GDP target in face of regional tensions and ageing population | China


China has set its target for GDP growth at 5%, in line with analysts’ expectations for another year of historically modest ambitions for the economy, amid regional tensions and its demographic crisis.

China’s premier, Li Qiang, spoke of the “challenges” facing China’s leaders as he delivered his annual government work report on Tuesday. He cited the global economy and regional tensions as hurdles for China’s recovery, as well as domestic issues such as low consumer demand in a challenging labour market.

Li was speaking at the opening session of the National People’s Congress (NPC), China’s annual parliamentary gathering.

In a draft version, the government work report spoke of “intensifying geopolitical conflicts” as being one of the negative pressures on China’s economy. But Li skipped this sentence in the speech he delivered to delegates and the media on Tuesday.

The 5% target is in line with 2023’s goal, which was notably restrained as China emerged from three years of strict zero-Covid measures which battered the economy.

But with the pandemic in the rear-view mirror, there are signs that some of China’s economy challenges may be structural, such as the ageing population and shrinking pool of workers. Official data released in January revealed that China’s working-age population accounted for 61% of the economy, down from 68% in 2013.

According to official statistics, China’s GDP grew by 5.2% in 2023. But independent economists estimate that the actual growth rate was lower, with analysts at Rhodium putting it at 1.5%. Economists think that achieving this year’s 5% target may be ambitious considering the Chinese economy’s structural problems and Beijing’s changing priorities. The International Monetary Fund predicts that China’s economy will grow by 4.6% this year.

Enodo Economics, a macroeconomic forecasting firm, said: “the GDP goal has decreased in importance in recent years”. China’s leader, Xi Jinping, “has de-emphasised growth – and therefore the importance of the GDP goal – in favour of ironing out the structural issues he believes undermine overall economic security.”

The NPC will also be considering the annual budget. Defence spending is expected to rise by 7.2%, while public security spending is slated to rise by 1.4%. Central government expenditures are expected to rise by 8.6%.

Li reiterated China’s committed to “reunification” with Taiwan but, as is custom, did not elaborate on an expected timeline for such an attempt.

Other targets announced by Li on Tuesday include the creation of 12m new urban jobs and increasing consumer prices by about 3%. China’s consumer price index fell by 0.8% in January, the fourth straight month of decline.

Li said the targets would “not be easy” but that “high quality development” remained the priority.

Li was speaking at this year’s Two Sessions, the concurrent meetings of China’s parliament and top consultative body. In a break with precedent, Li will not be answering questions directly from the press this year.

Additional research by Chi Hui Lin



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