by China’s top leaders set an ambitious 2024 economic growth target as they sought to bolster confidence in an economy facing its biggest challenges in decades.
But they announced only modest measures to stimulate growth, refraining from the kind of bold measures the business community has been seeking to address a housing crisis, a loss of confidence among Chinese households and cautious investors.
Premier Li Qiang, the country’s No. 2 official after Xi Jinping, said in his Tuesday report to the legislature’s annual session that the government would aim for economic growth of “around 5 percent.” That’s the same goal China’s leadership set for itself last year, when official statistics ended up showing the country’s gross domestic product grew 5.2 percent.
The central government’s spending program showed little change. The fiscal deficit was set at 3 percent of economic input, the same target as at the beginning of last year. Last year’s deficit was eventually raised to 3.8 percent to accommodate higher borrowing, something the government signaled could happen again in 2024.
The deficit is important because the more the government borrows, the more it can spend on initiatives that could boost the economy.
Conspicuously missing from the prime minister’s agenda and budget documents released Tuesday was a measure to shore up the country’s social safety net or introduce other policies, such as vouchers or coupons, that would directly address the very weak confidence of Chinese consumers and your unwillingness to spend money.
“There is a lot of positive noise for the economy, but not many concrete proposals on how to solve the country’s growth difficulties,” said Neil Thomas, a fellow at the Asia Society’s China Analysis Center.
Some economists question whether growth was really as high last year as China claims. Additionally, there was a modest rebound last year because strict “zero Covid” measures were in place until December 2022. Achieving the same growth this year, without the benefit of that rebound, could be much more difficult.
Consumers and investors have been skeptical about the prospects for a lasting recovery. China’s stock markets fell sharply in January and early February, before recovering in the past four weeks, as the government took steps to encourage stock buying. But Li maintained that China was on the right path.
China has “resisted external pressures and overcome internal difficulties,” Li told the National People’s Congress, a body controlled by the Communist Party that passes laws and budgets. “The overall economy is recovering.”
The National People’s Congress, a week-long choreographed event, typically focuses on short-term government initiatives, especially economic goals. China’s growth goal 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 tap new growth engines such as clean energy and electric vehicles. Mr. Li’s report also noted new spending on artificial intelligence and a plan to “intensify research on disruptive and cutting-edge technologies.”
But those efforts could be slowed by a tangle of problems surrounding the real estate sector: a glut of apartments, debt-ridden real estate companies and local governments, and home buyers reluctant to invest money in real estate when values are falling.
Achieving China’s growth target this year may be difficult without another big round of bond-fueled state spending.
“I think they are being cautious about opening the taps too much before seeing if this type of financing has the desired effects,” said Eswar Prasad, an economist at Cornell University.
Many local and provincial governments in China are struggling with heavy debts. Li said the central government would allow only a small 2.6 percent increase in bond sales to help these governments.
Economists and global credit agencies have long recommended that China strengthen its safety net, a change 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 cope with an aging society with fewer workers to support each older person. China’s birth rate has almost halved since 2016 and about 15 percent of the population is 65 years old or older, a figure that will likely rise to more than 20 percent by 2030.
Tao Wang, head of Asia economic research at UBS bank, said the government needed to do more to help the property market. Dozens of property developers have collapsed in recent years, and widespread defaults “not only hurt developers but also homebuyers and their confidence,” Ms. Wang said.
“They need to do more because the downward pressure on the economy is still quite serious,” he added.
China’s economy also faces strong forces from outside 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. And many multinational executives remain concerned about the increasing emphasis on domestic security and surveillance that Beijing has adopted during more than a decade of Xi’s rule.
China’s military spending would expand by 7.2 percent in 2024 (the same percentage increase as last year) and reach about $231 billion, according to the new budget. China has been increasing its military expenditures for several decades, now the second largest in the world after the United States. Washington has approved a military budget of $886 billion for its latest financial year.
The economy’s biggest pain point lies in the vast construction sector, which is in free fall after the bursting of a decades-long housing bubble over the past two years.
Home sales by the country’s 100 largest real estate developers plummeted 60 percent in February compared to the same month last year. Consumer confidence in China has not recovered after falling precipitously during the two-month Covid lockdown in Shanghai in 2022.
China’s best chance to maintain economic growth may be to further expand its trade surplus in manufactured goods, which already accounts for a tenth of the country’s entire economy. The Ministry of Commerce has been issuing directives this winter aimed at improving exports.
Southeast China’s Shenzhen, the hometown of BYD, the country’s top electric vehicle maker, issued 24 municipal directives last week to boost overseas car sales, particularly by helping the city’s companies buy more ships that can transport cars to distant markets.
But the United States and the European Union have expressed concern about job losses and have begun taking steps to limit trade with China. And falling prices in China mean that gains in the physical volume of the country’s exports and in China’s share of global trade may not translate into more money.
Vivian Wang contributed reporting from Beijing. Li you, claire fu and Amy Chang-Chien contributed to the research.
