China's top leaders have set an ambitious target for economic growth in 2024 as they seek to bolster confidence in an economy facing its biggest challenges in decades.
But they announced only moderate measures to stimulate growth, with the business community refraining from bolder measures in the face of an asset crisis, a loss of confidence among Chinese households and investor wariness.
Premier Li Keqiang, the country's No. 2 official after Xi Jinping, said in his statement to the annual session of the legislature on Tuesday that the government expects economic growth of “around 5 percent.” Official figures show the country's gross domestic product grew by 5.2 percent, the same target set by China's leadership last year.
There is little change in the central government's spending plan. The fiscal deficit was pegged 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 further borrowing, which the government signaled could happen again in 2024.
Deficits are important because the more the government borrows, the more it can spend on initiatives that can boost the economy.
Conspicuously missing from the premier's agenda and budget documents released on Tuesday were any plans to boost the country's social safety net or introduce other policies, such as vouchers or coupons, that would directly address Chinese consumers' extremely weak confidence and unwillingness to spend money.
“There are a lot of positive noises for the economy, but no concrete plans on how to solve the country's development difficulties,” he said. Neil ThomasA fellow at the Asia Society's Center for China Analysis.
Some economists question whether last year's growth was really as high as China claims. Additionally, last year brought a modest rebound as strict “Zero Covid” measures were in place until December 2022. Achieving the same growth this year, without the benefit of that recovery, may be more difficult.
Consumers And investors remain skeptical about the prospects for a sustained recovery. Stock markets in China fell sharply in January and early February before recovering in the past four weeks as the government moved to encourage stock purchases. But China is on the right track, Mr.
China has “withstood external pressures and overcome internal difficulties,” Mr. Li told the National People's Congress, which approves laws and budgets controlled by the Communist Party. “The economy is generally recovering.”
The National People's Congress, a weekly event, usually focuses on the government's near-term initiatives, especially economic objectives. China's growth goals, and the ways the government is trying to achieve them, have come under intense international scrutiny this year.
Communist Party leaders are trying to restore confidence in China's long-term prospects and harness new drivers of growth, such as clean energy and electric vehicles. Mr. Li's report flagged new spending on artificial intelligence and plans to “accelerate research into disruptive and frontier technologies.”
But those efforts could be dragged down by a tangle of problems surrounding the housing sector: apartment complexes, debt-ridden property companies and local governments, and homebuyers reluctant to sink money into real estate when values fall.
Achieving China's growth target this year may be difficult without another big round of bond-fueled state spending.
“I think they are cautious about opening the pipeline too wide before seeing if this type of financing has the desired effect,” said Cornell University economist Ishwar Prasad.
Many local and provincial governments across China are struggling with heavy debts. The central government will only allow a small increase of 2.6 percent in bond sales to help these governments, Mr. Li said.
Economists and global lending agencies have long recommended that China strengthen its safety net, which could boost weak consumer confidence and enable Chinese households to start saving less and spending more.
But when they already have to figure out how to cope with an aging society with fewer workers to support each senior, the authorities are keen to increase social spending. China's birth rate has halved since 2016 and accounts for 15 percent of the population Age 65 or older – a number that could grow by more than 20 percent by 2030.
The government needs to do more to help the real estate market, said Tao Wang, head of Asia economics research at UBS Bank. Dozens of property developers have collapsed in the past several years, and widespread defaults “hurt not only developers, but homebuyers and their confidence,” Ms Wang said.
“They need to do more because the downward pressure on the economy is very intense,” he added.
China's economy faces strong forces from outside its borders. Government officials in the United States and Europe view Chinese trade practices as unfair or national security threats. And due to the ever-increasing emphasis on homeland security and surveillance by many executives in multinational corporations, Mr. Beijing has embraced Xi's more than a decade in power
China's military spending will expand 7.2 percent in 2024 — up from the same percentage last year — and reach about $231 billion, the new budget says. China has been increasing its military spending for decades, now second only to the United States in the world. Washington approved an $886 billion military budget for its latest fiscal year.
The economy's biggest strain is in the broader construction industry, which has been on a nosedive in the past two years after bursting a decades-long housing bubble.
Home sales by the nation's 100 largest real estate developers fell 60 percent in February from the same month last year. In 2022, consumer confidence across China did not recover after falling sharply during Shanghai's two-month Covid lockdown.
China's best chance of maintaining economic growth may be to further expand its trade surplus in manufactured goods, which already represents about one-tenth of the entire country's economy. The Commerce Ministry is issuing directives aimed at boosting exports this winter.
Shenzhen in southeast China – the hometown of BYD, the country's dominant electric vehicle maker – last week issued 24 municipal orders to boost overseas car sales, specifically helping companies in the city 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 measures to restrict trade with China. And as prices fall in China, gains in the physical volume of the country's exports and China's share of global trade may not translate into much cash.
Vivian Wang Contributed reporting from Beijing. Li Yu, Claire Fu And Amy Chang Chien Research contributed.
