"China sets modest growth target as economic risks persist"

" China sets modest growth target as economic risks persist \r\n\r\nChina set a modest economic growth target of around 5% for the year, a sign the nation\u2019s top leaders are still concerned about the recovery, given weak consumer confidence, declining exports and a housing market still under pressure.\r\n\r\nPremier Li Keqiang announced the goal for gross domestic product in his final government work report to the National People\u2019s Congress \u2014 the annual parliamentary gathering \u2014 on Sunday. Economists had projected a target of higher than 5%.\r\n\r\nThe GDP target compares to last year\u2019s goal of around 5.5%, which China missed by a large margin after Covid outbreaks and restrictions, as well as the property crisis, dragged growth down to just 3%. The median consensus is for the economy to expand 5.3% this year.\r\n\r\nThe growth target is a key indication of how China\u2019s leaders will shape policy for 2023 now that the country has abandoned its zero tolerance approach to Covid and is working to restore confidence in the economy. Investors are watching for signs authorities will shift their stance on fiscal and monetary stimulus, which in turn could have implications for global commodity prices and growth.\r\n\r\nThe state of the economy and its continued improvement will be of major significance to President Xi Jinping\u2019s new leadership team as he looks to further consolidate the Communist Party\u2019s hold over the world\u2019s second-biggest economy. This year\u2019s NPC will be the last for mainstays including Premier Li, with Xi ally Li Qiang, already the party\u2019s No. 2, expected to take his place.\r\n \r\nThe GDP target \u201cis on the conservative side,\u201d Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. \u201cBecause the Covid policy has been adjusted, there\u2019s no urgency for them to run another round of big economic stimulus.\u201d\r\n\r\nThe government work report as well as the budget released on Sunday suggests fiscal support will be restrained. The target for the official deficit \u2014 based on a narrow definition of the budget that covers only general revenue and spending \u2014 was raised to 3% of GDP for this year from 2.8%.\r\n\r\nHowever, local governments are likely to scale back major investments. The quota for special local bonds, used mainly to finance infrastructure projects, was set at 3.8 trillion yuan ($550 billion) for this year \u2014 smaller than the total issuance of 4.04 trillion yuan.\r\n\r\nBeijing has already suggested any further economic support would be limited. The People\u2019s Bank of China has vowed to refrain from using \u201cflood-style\u201d stimulus, likely meaning aggressive rate cuts aren\u2019t on the table this year. The finance minister has said fiscal conditions will gradually improve as the economy rebounds, and has promised that any expansion in fiscal expenditure will be moderate.\r\n\r\nThe report also highlighted the importance of national security, in line with signals from the ruling party\u2019s congress last year. China\u2019s defense spending will rise at the fastest pace in four years this year, climbing 7.2% to 1.55 trillion yuan.\r\n\r\nTechnology policy will focus on \u201cself-reliance and self-strengthening,\u201d according to the report, with the government looking to play an organizing role in key technology breakthroughs.\r\n\r\nThe report glossed over some of the biggest ongoing challenges China and the world are facing, such as the pandemic and Russia\u2019s war in Ukraine.\r\n\r\n\u201cAs a responsible major country, China played significant and constructive roles in enhancing international Covid-19 cooperation and addressing global challenges and regional hotspot issues, thus making important contributions to global peace and development,\u201d Li said, without elaborating on what regional issues he was referring to.\r\n\r\nThe government is targeting an increase in new jobs, although will allow for a higher jobless rate. That suggests officials are paying more attention to the quality of economic growth, not just its speed, according to Zhou Hao, chief economist at Guotai Junan International Holdings.\r\n\r\n\u201cAs the job creation also matters for the domestic consumption, a higher target for 2023 means that the Chinese authorities see the importance of consumption which will help unleash long-term growth potential,\u201d he said.\r\n\r\nChina\u2019s economic rebound this year has been off to a solid start. The initial recovery was a bit cautious in January as a chaotic end to Covid restrictions caused a spike in infections and many businesses closed for the Lunar New Year holiday. Travel congestion has picked up since, and February manufacturing and services activity rebounded sharply.\r\n\r\nA sustained economic rebound is far from certain, no matter how strong the recovery has been.\r\n\r\nExport demand continues to languish, while the property market has yet to stabilize even with promising signs from home sales. Also key to the outlook will be how quickly business and consumer confidence can bounce back, with a complicating factor being continued US-China tensions over technology and geopolitics."

"China sets modest growth target as economic risks persist"

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