March 5, 2024
BEIJING – China is gunning for an expansion of around 5 per cent in 2024, as the world’s second-largest economy seeks to maintain its growth momentum after hitting 2023’s target. The headline growth target contained in Premier Li Qiang’s maiden government work report, delivered at the opening of China’s annual legislature meeting, follows 2023’s target of around 5 per cent after the country failed to hit 2022’s goal of about 5.5 per cent.
Official data showed that China’s economy grew 5.2 per cent in 2023 – a feat helped by government spending on infrastructure and as well as easing measures including steps to boost liquidity in the market.
“In setting the growth rate at around 5 per cent, we have taken into account the need to boost employment and incomes and prevent and defuse risks,” Mr Li said in delivering the work report at the Great Hall of the People.
In 2024, the government will also aim to create 12 million new urban jobs and its unemployment rate is projected to be about 5.5 per cent, the report showed. Policymakers also expect inflation to go up by 3 per cent.
The projected increases are similar to 2023’s targets.
Military spending will rise to 1.67 trillion yuan (S$310.85 billion), an increase by 7.2 per cent, similar to 2023’s increase.
“Achieving this year’s targets will not be easy,” Mr Li said. “Domestically, owing to the impact of a three-year Covid-19 pandemic, many difficulties facing our economic recovery and development had yet to be resolved.”
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These include the ongoing slump in the property market, weakened global demand, and high local government debt, he pointed out.
“We are confronted with both pressure on overall job creation and structural employment problems,” Mr Li said. “Some primary-level governments are facing fiscal difficulties.”
Economists have expressed doubts that China can hit its growth target in 2024, saying that much will depend on the strength of the government’s support. The International Monetary Fund in February projected that China will grow by 4.6 per cent this year, hemmed in by weak export demand and a severe property slump.
High up on the government’s priority for 2024 is to further boost China’s self-reliance in science and technology with the cultivation of “new quality productive forces”, Mr Li said, referring to cutting-edge industries such as intelligent new energy vehicles, hydrogen power, and commercial space flight.
Focusing on science and technological innovation has also replaced Covid-19 management as the foremost priority for the National Development Reform Commission (NDRC), China’s top economic planner, this year.
Boosting domestic demand remains the NDRC’s second-top priority, as it was in 2023, according to the commission’s draft plan for the year released on March 5.
Public and private organisations will also pool together resources “to make breakthroughs in core technologies in key fields and step up research on disruptive and frontier technologies”, Mr Li said in his work report.
The Finance Ministry’s draft budget, also released on March 5, showed that 370.8 billion yuan has been allocated for science and technology, a 10 per cent increase from 2023. Monies will be spent with a focus on basic research and applications, as well as on national strategic tasks.
On the whole, however, prospects for fiscal revenue and expenditure for the year “remain quite grave”, the Finance Ministry noted in its draft budget.
This is due to tax reduction policies to spur business growth introduced in 2023 and “obligatory commitments to spending increases in key areas such as national defence, technological advancement and environmental protection”, among other outlays.
Meanwhile, the need to boost China’s worsening housing market is the biggest headache for policymakers, as new construction plunged 20.4 per cent and investment fell 9.6 per cent in 2023, based on official data, though declines have been narrowing. The downturn, which started in 2020 due to a regulatory clampdown to curb developers’ runaway debt, has hit the revenues of local governments that had previously relied heavily on land sales for funding, causing many to go into heavy debt. Economists have also blamed the property crisis for weakened consumer demand, given that 70 per cent of Chinese household wealth is tied to property.
Mr Li said in his work report that the government will “move faster to foster a new development model for real estate”, as a way to control long-term risk to the economy.
Beijing will also further tighten oversight on government debt and revamp ways that local officials use to raise revenue to better defuse financial dangers posed to the country, he added.
“We will refine real estate policies and meet justified financing demands of real estate enterprises,” Mr Li said.
On foreign policy, Mr Li said China will stay the course on “an independent foreign policy of peace” while remaining firm in “opposing all hegemonic, high-handed, and bullying acts”.
Dr Dan Wang, chief economist at Hang Seng Bank in Shanghai, told The Straits Times that the target of around 5 per cent growth is “highly unrealistic”. She pointed to how pressures on the economy in 2024 are higher than those in 2023, including how the housing market has been worsening.
“Even a target of 4.5 per cent would be a stretch,” she added.
Economics professor Hu Guangzhou at the China Europe International Business School in Shanghai, however, said that “while China faces strong economic headwinds, its growth potential remains solid”.
“Impressive growth in the new energy-related sectors including electric vehicles in the past year is a testament to the resilience of the economy,” he told ST.
Beijing has signalled that it will further prop up its economy, with economists expecting more rounds of stimulus. Since Feb 5, banks have been allowed to hold smaller cash reserves, releasing 1 trillion yuan in long-term capital into the market, following an easing announcement by the central bank on Jan 25. About 5,000 delegates are gathering in Beijing this week for China’s annual parliamentary sessions, known as Two Sessions, or lianghui.
While China has shed its Covid-19 controls for 2024’s meetings and resumed its pre-pandemic format, it has, at the same time, introduced what will likely be permanent changes. These include keeping the conclave short at a week, and doing away with the premier’s press conference on the final day, a three-decade legacy.