April 24, 2024

Opinion | China growth targets, absence of stimulus reflect determination to transform economy

At first glance two things stood out about Li Qiang’s first work report to the National People’s Congress as premier. It was shorter and more precise than usual and did not include radical fiscal stimulus for China’s sluggish economy. That may have disappointed observers at home and abroad. But the fact there were no such surprises focused attention on Beijing’s assessment of the world’s second biggest economy and its recovery and growth strategy.

The absence of surprises extended to the government’s gross domestic product growth target for this year. Li set it at “around 5 per cent”, in line with last year’s official outcome of 5.2 per cent. The central government also budgeted for a deficit of 3 per cent – the same as last year.

The job creation target is more aggressive in the face of youth unemployment and 11.7 million graduates heading for the market, and the target for domestic consumption, a post-Covid drag on the economy, is also set higher. But all in all the aim is stable if unspectacular growth.

Risks ahead but China’s economy to stay on long-term, tech-led course

This does not reflect Western media reports talking down China’s economy and portraying the leadership as out of touch with reality on the ground. Rather, it reflects a strategic assessment of the economic situation China faces based on a major intelligence-gathering exercise at a grass-roots level. The leadership believes negative external factors will become more complex and challenging. Li mentioned them several times in a work report that took less than an hour to deliver.

That is not to say there was no mention of many deep-seated issues that need to be addressed in China’s internal economic structure. Indeed, all these problems have become more obvious and critical. But in these circumstances, as experience has shown, if the authorities simply pump more money into the economy it does not always have desirable results or side effects.

Beijing believes China’s economic condition is not as bad as made out, particularly by some Western media, but is going through a phase of restructuring, exemplified by development of the advanced manufacturing sector, such as electric vehicles. It is a typical case of an economy going through change as it moves up the value chain.

China’s defence budget signals military readiness, not imminent war, experts say

Amid expectations of external turbulence, internal stability is paramount. If an economy of the mainland’s size can maintain 5 per cent growth for say 10 years then there is confidence it can meet policy objectives. That assessment is why China is not pushing the panic button and adopting radical stimulus measures.

But it is not an easy goal. Restructuring is a key path. That is why development of science, technology and innovation takes precedence in the work report. Even without sanctions by the United States and its allies China sees the sector as key to future national development. This is reflected in central government budgeting of a 10 per cent increase in spending on science and technology, compared with 2 per cent last year.

By comparison, defence spending on modernisation of military forces will increase by 7.2 per cent, the same as last year, and spending on diplomacy will be halved to 6 per cent. China is making a very focused attempt to boost science and technology. This is one area that will largely shape its future.

Hong Kong leader vows to enact domestic security law ‘as soon as possible’

The premier also spoke of the critical roles of talent and education in the development of science, technology and innovation – grooming talent to harness research and development. In this regard, “high-quality development” is now the key term for China’s economic efforts, and to achieve it requires “new quality productivity”, which in general means technology-driven forces. It explains why among the 10 tasks of the government for this year, first is how to speed up the development of “new quality productivity”, including pushing the digital economy.

The second is to enhance investment in education and nurture talent that China needs. Li also continues to encourage private sector and foreign investment. His report sets clear direction for the nation, now in its critical stage of economic restructuring.

Li also urged Hong Kong to “play to its strengths” as it takes an active role in the Greater Bay Area to help it better integrate with national development, while offering Beijing’s support in maintaining the city’s long-term prosperity and stability. Hong Kong, Macau and nine other cities have been mentioned in the premier’s work report since 2017, as part of a plan to build up the region as a technology and innovation hub, helping to power China’s economy with quality growth in healthier sectors.

Delegates leave the stage after the opening ceremony of the second session of the 14th National People’s Congress of China at the Great Hall of the People. Photo: EPA-EFE

Li underlined the importance of “fully, accurately and firmly” implementing the “one country, two systems” policy and stressed it should be “Hong Kong people governing Hong Kong” with a “high degree of autonomy”. But he also offered a reminder of the turmoil of 2019, saying Hong Kong and Macau should be ruled according to the law and “administered by patriots”. After the unrest, Beijing implemented a national security law in 2020, followed by electoral reforms in Hong Kong in 2021 to ensure only “patriots” held power.

The city can expect firm and continuous support from Beijing under the established principle.

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