China sets a modest growth target of around 5% as Parliament opens

  • The GDP target is around 5% at the lower end of the forecast
  • Work report focuses on consumption and jobs
  • Defense spending up 7.2% from 7.1%
  • The budget deficit target is at 3%, greater than the previous 2.8%

BEIJING (Reuters) – China set a modest target for economic growth this year of about 5 percent on Sunday as the annual session of the National People’s Congress (NPC) got under way, as it prepared to deliver the government’s biggest shake-up. -up in hold.

China’s gross domestic product grew just 3% last year, one of its worst showings in decades, after three years of COVID-19 restrictions, a crisis in the vast real estate sector, a crackdown on private enterprise, and weak demand for Chinese. exports.

In his work report, outgoing Premier Li Keqiang stressed the need for economic stability and expansion of consumption, set a target of creating about 12 million urban jobs this year, up from last year’s target of at least 11 million, and warned that risks remain unchanged. remain. Real estate sector.

Lee set the budget deficit target at 3.0% of GDP, expanding from a target of around 2.8% last year.

“We must give priority to recovery and expansion of consumption,” said Li, who spoke for just under an hour in a speech to open parliament, which will run until March 13.

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“The incomes of urban and rural residents must be boosted through multiple channels. We must balance spending on expensive items and promote recovery in the consumption of consumer services,” he said.

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This year’s growth target of around 5% was at the lower end of expectations, with political sources recently telling Reuters that a range as high as 6% could be set. It is also below last year’s target of around 5.5%.

“While the official growth target has been lowered for the second year in a row, which may be disappointing for the market, we believe investors (should) pay attention to the underlying growth momentum to gauge the pace of recovery,” said Zhou Hao, an economist at the company. Guotai Junan International.

Li and a handful of reform-minded economic policy officials are set to retire during the congress, making room for loyalists to President Xi Jinping, who tightened his grip on power when he secured an unprecedented third term in the Communist Party in October. Congress.

During the National People’s Congress, former Shanghai Party chief Li Qiang, a longtime ally of Xi, is expected to be named prime minister, charged with revitalizing the world’s second-largest economy.

State media reported Tuesday that the ratified parliament will also discuss Xi’s plans for an “intensive” and “wide-ranging” reorganization of state and Communist Party entities, with analysts predicting the Communist Party’s penetration of state bodies will deepen.

High military budget

Li said China’s armed forces should devote more energy to training under combat conditions and enhancing combat readiness. The budget included a 7.2% increase in defense spending this year, which is slightly larger than the 7.1% increase in last year’s budget and again exceeds growth. projected gross domestic product. .

On Taiwan, Li struck a moderate tone, saying that China should promote the peaceful development of cross-strait relations and advance China’s “peaceful reunification” process, as well as take firm steps to oppose Taiwan’s independence.

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Beijing faces an array of challenges, including increasingly fraught relations with the United States and a worsening demographic outlook, with birth rates falling and the population declining last year for the first time since the 1961 famine.

China plans to reduce costs of childbirth, childcare and education, and will actively respond to population aging and fertility decline, the country planner said in a work report released on Sunday.

The National People’s Congress opened on a foggy day amid tight security in the Chinese capital, as 2,948 delegates gathered in the cavernous Great Hall of the People on the west side of Tiananmen Square.

During the session, the Chinese legislature will vote on a plan to reform institutions under the State Council or the Cabinet, and decide on the new cabinet line-up for the next five years, according to the meeting’s agenda.

This is the first meeting of the National People’s Congress since China abruptly abandoned its anti-coronavirus policy in December, after rare nationwide protests. Barring brief meetings of the pandemic in the past three years, this year’s cycle will be the shortest in at least 40 years, according to the NPC Observer blog.

Additional coverage by the Beijing Newspaper; Written by Tony Monroe. Editing by Himani Sarkar, William Mallard, and Simon Cameron-Moore

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