China still targeting GDP growth of “around 5 %” this year

The National People’s Congress (NPC), China’s annual parliamentary meeting, kicked off on March 5 with the announcement of the national GDP growth target and a range of other economic policy objectives. Following traditional protocol, premier Li Qiang presented the government work report that focuses on last year’s achievements and sets forth the goals for this year. The top goals listed were industrial modernisation, redoubled efforts in science and education, as well as expanding domestic demand. As in recent years, the unemployment target was set around 5.5 % and inflation should remain below 3 %. The average disposable incomes should at least keep pace with GDP growth and the energy-consumption-to-GDP ratio should decrease by 2.5 %. Although no numerical target was mentioned, the growth in indebtedness should stay in step with the GDP and inflation targets.

The “about 5 %” GDP growth target for this year is tougher to achieve than last year. Not only have many of China’s economic problems worsened (such as those of the real estate sector), but the low basis reference from the pandemic is also gone. In addition to premier Li’s concession that hitting this year’s targets will be challenging, the work report failed to clarify how such targets might be achieved. The government seems to be willing to take a more positive approach to dealing with the real estate sector, and promises to meet the sector’s justifiable financing demands. No large-scale support programmes, however, were mentioned. The 2024 budget currently is based on keeping the official deficit at 3 % of GDP. China’s actual government deficit, of course, will be significantly larger than the budget projection (BOFIT Weekly 8/2024). A new form of off-budget financing was, however, announced in the form of “ultra-long” central government special bonds that will be issued 1 trillion yuan (0.8 % of GDP) this year. The work report proposes that this form of financing will continue every year over the next several years.

This year’s NPC is tighter-lipped than in previous years. The premier, for example, will skip the traditional post-address press conference where he opens the questioning to economy-related issues. Not only was this year’s press conference scrubbed well in advance due to the “special circumstances,” but it was also announced that the press conference has been dropped for at least the next three years, i.e. the remaining term of the current parliament. Some commentators speculate that the government simply has less to say about the current economic course. The scheduled third plenary session of the Party’s central committee that focuses on economic matters was never convened. The NPC largely serves as a rubber stamp in approving leadership proposals on legislation and regulatory decrees. Economic reforms and broad economic frameworks are dealt with within the party leaders at the third plenary session held once every five years. According to the traditional schedule, that meeting should have been held last year in October or November. No information has been released about arranging the meeting.