China raises its ambitions for 2023 and could aim for 6% growth

By Kevin Yao

BEIJING, March 2 (Reuters) – China is getting more ambitious with its 2023 growth target of up to 6% in a bid to boost investor and consumer confidence and capitalize on a promising post-pandemic recovery , according to sources who participate in the debates on the subject.

Four of the sources said China would likely aim for growth of up to 6%, while three others said the target was between 5% and 5.5%. All spoke on condition of anonymity as the talks were held behind closed doors.

Taken together, these figures indicate heightened optimism in Chinese policy circles compared to November, when government advisers recommended more modest targets ranging from 4.5% to 5.5%.

The recommendations above were made weeks before China lifted the world’s toughest COVID-19 restrictions. The latest data shows that the economy is recovering from the pandemic at a better than expected pace.

The final growth target, which could be a range, will be announced on March 5, at the start of China’s annual legislative meeting.

“The growth target this year could be 5-6%,” said one of those involved in the talks. “We need to achieve an economic recovery, boost employment and confidence, these are the key factors we need to take into account.”

One of the three sources advocating a more modest target warned that “the real estate sector continues to fall and it is difficult to fill the void, while foreign trade risks dragging down economic growth this year”.

None of the seven sources participate in the final decision-making process.

According to four of those consulted, the government also plans to present more stimulus measures at the National People’s Congress this month, to mitigate the impact of the weak real estate market and lower global demand. for its exports.

To spur growth, the government should increase its annual budget deficit to about 3 percent of gross domestic product this year and issue about 4 trillion yuan in special bonds to support investment spending, the sources said.

The new economic leadership team, expected to be led by former Shanghai Communist Party leader Li Qiang as China’s new premier, is eager to demonstrate its ability to deliver greater economic growth that creates more jobs and to ease funding constraints on local governments, the sources said.

FAILURE

In 2022, the Chinese economy grew by 3% compared to the previous year, which is a big miss compared to the official target of around 5.5%, because the COVID-19 pandemic, the tensions in the real estate market and the slowdown in global demand have been costly. . Excluding 2020, when the pandemic began, it was the worst result since 1976, the final year of Mao Zedong’s cultural revolution that ravaged the economy for a decade.

It was also the biggest failure to achieve a growth goal. Previously, China only narrowly missed the mark during the Asian financial crisis of the late 1990s and a currency crisis in 2014-15.

The last time China set a target range was in 2019, between 6 and 6.5%.

Some economists say China’s ambitious annual growth targets are counterproductive and that economic leaders should instead focus on structural reforms to improve the sustainability of any economic expansion.

Ambitious goals in the past have driven local governments to launch costly infrastructure projects, which have contributed significantly to China’s global indebtedness of nearly 300% of economic output.

Three of the sources also said China would maintain the 3% inflation target.

GOOD START

Consumption and services have led China’s recovery so far this year. Manufacturing activity also rose in February at the fastest pace in more than a decade, an official survey showed on Wednesday, beating expectations.

Iris Pang, chief economist for the Greater China region (which includes the People’s Republic of China, with its Hong Kong and Macao special administrations, and Taiwan) at ING, said in a note that this week’s upbeat data gave the government a weighted reason to set itself a high growth target of between 5.5% and 6%.

On March 5, outgoing Premier Li Keqiang is due to present the government work report for 2023, which includes key economic goals and political priorities.

On Wednesday, state media quoted Li as saying the government was still amending the work report.

“Growth this year will be over 6%, which is not high given last year’s low base,” Yu Yongding, a leading government economist who previously advised the Bank, told Reuters. popular in China.

Yu said a growth target above 6% would help “boost morale and boost China’s economic growth potential.”

(Reporting by Kevin Yao; Editing in Spanish by Tomás Cobos)