China sets an economic growth target of 5% but says it will not be easy to achieve

BEIJING, March 5, (AP): China aims to achieve 5% economic growth this year, Premier Li Qiang said Tuesday, acknowledging that it will be a challenging goal in difficult times.

In his address to the annual session of the National People’s Congress, Li outlined plans to boost spending on developing advanced technology, fortifying China’s military and supporting the economy, among many other longstanding goals. But there was no big package of stimulus to help boost markets and reassure worried investors.

Li, presenting an annual report on the past year and future plans, said the government would continue with a “proactive fiscal policy and prudent monetary policy,” suggesting no major change in the leadership’s approach to the economy.

He did unveil a plan to boost growth by issuing long-term bonds over the next several years, starting with 1 trillion yuan (about $139 billion) this year. The money would be spent to implement “major national strategies” and fortify security “in key areas.”

Li said the government plans a “new development model” for the housing market, including building government-subsidized housing in a bid to ease a prolonged real estate slump that has been a major drag on the economy.

That appeared to confirm reports that authorities plan to use public funds to buy up some of China’s legions of unoccupied apartments and turn them into affordable housing.

“The foundation for China’s sustained economic recovery is not yet stable, with insufficient effective demand, overcapacity in some industries, weak social expectations, and still many risks and hidden dangers,” Li told delegates to the annual session of the congress, China’s ceremonial legislature, in Beijing’s majestic Great Hall of the People, adjacent to Tiananmen Square.

The government released a draft budget that included 1.67 trillion yuan ($231 billion) in defense spending - a rise of 7.2% that matches the pace of increase in 2023 and reflects a continued focus on security as well as the economy.

China’s economy grew at a 5.2% pace last year, but that was on top of just 3% annual growth rate in 2022, when millions of people were locked down for weeks and some businesses were ordered to close as the country endured the worst disruptions from the COVID-19 pandemic. Replicating the same growth rate this year will be more difficult, because the economy is starting from a higher base.

“Achieving this year’s targets will not be easy,” Li said, referring not only to economic growth and other goals including raising incomes, creating 12 million jobs and making the economy more energy efficient in pursuit of climate goals.

China has set a 2.5% goal for reducing its energy consumption, after having failed to meet its target for a 2% cut in 2023.

Xi Jinping, China’s most powerful leader in decades, heads the party and has installed loyalists like Li in top posts to strengthen its grip on the economy and society. Xi, 70, is in his third five-year term as party general secretary and may hold that post for life.

The meetings of the national congress run for about a week and are China’s biggest political events of the year. The congress only endorses policies already set by top leaders, but it provides a platform to showcase the party’s accomplishments and to build support for its aims.

Leaders have been emphasizing the need to raise consumer spending to help drive the economy. But the consumption-led recovery it was counting on after anti-pandemic controls ended in late 2022 has faded and most forecasts are for growth to slow this year.