China Pledges To Transform Economy, Targets 5% Growth: Prime Minister

1. China Pledges To Transform Economy, Targets 5% Growth: Prime Minister

The Chinese government aims to achieve a 5% growth in 2024 by reforming its development framework, preventing industrial overcapacity, reducing property sector risks, and limiting unproductive local government expenditure, said the country's Prime Minister Li Qiang on Tuesday.

Inflation, unemployment

Addressing the annual National People's Congress (NPC) meeting, the premier also discussed other economic goals. For instance, Beijing aspires to accomplish an urban unemployment rate of about 5.5% for 2023, which was projected earlier, and create 12 million new urban jobs this year.

Additionally, it plans to restrain the country's consumer price index (CPI) at about 3% in 2024—the same as its target inflation rate for the previous year.

In 2023, China's urban unemployment rate came to 5.2% amid the creation of 12.44 million jobs, according to the National Bureau of Statistics (NBS), while its CPI edged up by 0.2% due to weak consumer demand levels.

The world's second-largest economy's growth target for the current year necessitates more robust government stimulus as China's GDP is heavily dependent on state infrastructure investment, which has already resulted in piles of municipal debt, said a Reuters report Tuesday.

China's uneven post-COVID recovery in 2023 has shed light on some deeply embedded structural issues, such as low household consumption and depreciating returns on investments, it added, heightening demand for a newer, more beneficial economic development framework.

The country's ongoing property crisis, rising inflation levels, stock market rout, and increasing local government debts are causing more pressure on leaders to act, noted Reuters.

"We should not lose sight of worst-case scenarios and should be well prepared for all risks and challenges...In particular, we must push ahead with transforming the growth model, making structural adjustments, improving quality, and enhancing performance," said Qiang.

China has revised its deficit-to-GDP ratio to 3% for 2024, from a 3.8% ratio set at the end of 2023.

Bond issues

While speaking at the meeting attended by more than 2,800 delegates, Qiang announced the issuance of "ultra-long" special treasury bonds equivalent to $138.9 billion (¥1 trillion) to fund significant projects under the umbrella of China's national growth strategy.

The premier also said that special-purpose bonds worth $541.8 billion would be issued for local governments in 2024, $13.9 billion more than the previous year's issuance.

Big number

China's defense expenditure is expected to grow by 7.2% to almost $232 billion in 2024, according to a Finance Ministry report Tuesday.

China's economy

In 2023, China's economy grew by 5.2%, surpassing the government's 5% target. However, the country's growth was offset by a fall in exports, the real estate sector, and a slow post-pandemic recovery of the economy.

Inflation fell by 0.8% year-on-year in January 2024, showing the sharpest drop in China's CPI in more than 14 years, resulting in deflationary pressures that may create more problems for the Chinese economy.