Chinse leaders set big growth goals without stimulus plans

China's top leaders set an ambitious goal for economic growth in 2024 as they tried to bolster conviction in an economy facing its biggest challenges in decades.

But they announced only modest measures to stimulate growth, refraining from the kind of bold moves the business sector has been looking for to address a property crisis, a loss of confidence among Chinese households and wariness by investors.

Premier Li Qiang, the country's No. 2 official after Xi Jinping, said in his report Tuesday to the annual session of the legislature that the government would seek economic growth of “around 5%.” That is the same target that China's leadership set for last year, when official statistics ended up showing that the country's gross domestic product grew 5.2%.

The central government's program for spending showed little change. The fiscal deficit was set at 3% of economic input — the same target as early last year. Last year's deficit was eventually raised to 3.8% to accommodate more 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 economic initiatives.

Conspicuously missing from the premier's agenda and budget documents released Tuesday was a move to shore up the country's social safety net or introduce other policies, like vouchers or coupons, that would directly address Chinese consumers' very weak confidence and unwillingness to spend money.

“There's a lot of positive noises for the economy, but not a lot of concrete proposals for how to resolve the country's growth difficulties,” said Neil Thomas, a fellow at the Center for China Analysis.

Some economists question whether growth was as high last year as China claims. In addition, last year brought a modest rebound because stringent “zero COVID” measures were in place until December 2022. Achieving the same growth this year, without the benefit of that rebound, could be much harder.

Consumers and investors have been skeptical about the prospects for a lasting recovery. Stock markets in China fell heavily in January and early February, before recovering over the past four weeks, as the government took steps to encourage stock buying. Li maintained that China was on the right track but acknowledged that the country faced challenges.

“The foundation for China's sustained economic recovery and growth is not solid enough, as evidenced by a lack of effective demand, overcapacity in some industries, low public expectations, and many lingering risks and hidden dangers,” he told the National People's Congress, a Communist Party-controlled body that approves laws and budgets.

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 wide before seeing if this type of financing has the desired effects,” said Eswar Prasad, a Cornell University economist.

Many local and provincial governments across China are struggling with heavy debts. Li said the central government would allow only a small increase of 2.6% to bond sales to help these governments.

Economists and global lending agencies have long recommended that China strengthen its safety net, a shift that could improve weak consumer confidence and persuade Chinese households to save less and start spending more.

But officials have been leery of increasing social spending when they need to figure out how to cope with an aging society with fewer workers to support each senior. China's birthrate has nearly halved since 2016 and about 15% of the population is age 65 or older — a figure likely to grow to more than 20% by 2030.

Tao Wang, head of Asia economic research for the bank UBS, said the government needed to do more to help the real estate market. Dozens of property developers have collapsed in the past several years, and the defaults “not only hurt developers but also homebuyers and their confidence.”

China's economy is also facing strong forces from outside its borders. Government officials in the United States and Europe are working to contain Chinese trade practices they consider to be unfair or national security threats.

China's military spending would expand by 7.2% in 2024 — the same percentage rise as last year — and reach about $231 billion, the new budget said. China has been increasing its military outlays, now the second largest in the world after the United States, for several decades. Washington has approved a military budget of $886 billion for its latest financial year.

China's best chance at maintaining economic growth may be to expand its trade surplus in manufactured goods, which represents a tenth of the country's economy. The Ministry of Commerce has been issuing directives aimed at enhancing exports.