China has set a growth target of “around 5 per cent” for 2023 as Beijing seeks to revive investor confidence after the damage wrought by President Xi Jinping’s draconian zero-Covid regime last year.
The figure, which was in line with analyst forecasts, was announced by Premier Li Keqiang at the Sunday opening of China’s rubber-stamp parliament, the National People’s Congress. China’s most important annual political gathering began amid heavy smog and low visibility in the capital.
Xi is expected to use this year’s parliamentary session to undertake sweeping changes to his administration, installing close loyalists to senior government jobs and overhauling portfolios such as finance and technology to centralise power further in the hands of the party leadership.
Li read out the government’s new work report before the roughly 3,000 members of the NPC, setting a target of 3 per cent of gross domestic product for China’s budget deficit this year while pledging to create 12mn new urban jobs and keep the unemployment rate at roughly 5.5 per cent.
“Hit by Covid-19 and other challenges, many enterprises and small businesses experienced acute distress,” said Li. “Maintaining employment stability is challenging and the budgetary imbalances of some local governments are substantial.”
If achieved, the target would represent a recovery from growth of just 3 per cent in 2022, one of the lowest levels in decades, after numerous Chinese cities suffered extended lockdowns in an effort to prevent the spread of the Omicron variant of coronavirus.
Beijing was forced to abandon the policy late last year after outbreaks in large cities raced out of control, and grassroots resistance in residential blocks morphed into nationwide protests against the restrictions.
“This growth target heralds the return of headline GDP growth as the organising principle for economic and financial policies but also signals that the era of rip-roaring growth is over,” said Eswar Prasad, senior fellow at the Brookings Institution.
“The government now faces the difficult challenge of bolstering household and business confidence through policies that support growth and the private sector.”
China’s economy has shown signs of recovery from the downturn, with sentiment in the manufacturing sector hitting a decade-high in February. But Li warned in his speech that “many difficulties and challenges still confront us”.
These included external problems, such as inflation in other countries, slowing global trade and economic growth, as well as “escalating” attempts “to suppress and contain China’s development”.
“At home, the foundation for stable growth needs to be consolidated, insufficient demand remains a pronounced problem, and the expectations of private investors and businesses are unstable,” Li said.
Li is expected to be replaced as premier, China’s number-two figure and head of the cabinet, by Li Qiang, a close Xi associate who presided over the lockdown of Shanghai last year as the city’s Communist party chief. He previously worked with Xi in Zhejiang province in the 2000s.
The Chinese president completed a clean sweep of the Communist party’s top decision-making body, the seven-member Politburo standing committee, in October, edging out rival factions and completing his domination of the country’s politics.
Aside from Li Qiang, Xi is expected to appoint new heads to the government’s main financial agencies and regulators, including the People’s Bank of China.
The existing economic team, led by vice-premier Liu He, a Harvard-trained economist, was known for its campaign to rein in China’s level of debt-to-GDP.
Analyst have expressed concerns that the new officials, many of whom have spent much of their careers as local government politicians, might be less inclined to tackle financial speculation.
Reporting by Joe Leahy, Ryan McMorrow, Sun Yu and Nian Liu in Beijing, Cheng Leng in Hong Kong and Kathrin Hille in Taipei