Thursday, July 25, 2024

China has set an economic growth target of 5%

BEIJING (AP) — China aims to reach 5% economic growth this year, Premier Li Keqiang said Tuesday, acknowledging that it will be a challenging goal in difficult times.

In his speech at the annual session of National People's CongressLi outlined plans to increase spending on developing advanced technology and strengthening China's military. supporting the economy, Among many long-term goals. But there was no big stimulus to lift markets and reassure anxious investors.

Li, presenting an annual report on the past year and future plans, said the government would continue with “pro-active fiscal policy and prudent monetary policy,” which would not make a major change in the leadership's approach to the economy.

He unveiled plans to boost growth by issuing long-term bonds over the next several years, starting with 1 trillion yuan (about $139 billion) this year. The money will be spent on implementing “key national strategies” and strengthening security in “key areas”.

Li said the government is planning a “new growth model” for the housing market, including building subsidized housing in an effort to ease the long-term real estate slump that has been a major drag on the economy. It confirms reports that authorities plan to use public funds to buy some of China's unoccupied apartments and convert them into affordable housing.

“The foundation for China's sustained economic recovery is still not stable, with insufficient effective demand, overcapacity in some industries, weak social expectations, and many other risks and hidden dangers,” Li told delegates at the annual session of China's Legislative Assembly. , Beijing's majestic Great Hall of the People adjacent to Tiananmen Square.

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The government released a draft budget that includes 1.67 trillion yuan ($231 billion) in defense spending — An increase of 7.2% This matches the increasing pace in 2023 and reflects the continued focus on security and economy.

China's economy grew at a pace of 5.2% last year, but it is on track for an annual growth rate of just 3% in 2022, with millions of people locked down for weeks and some businesses ordered to close. The covid-19 pandemic. It will be very difficult to replicate the same growth rate this year as the economy is starting from a higher base.

Initial reactions were skeptical, with Oxford Economics' Louis Lew expecting “potential growth to be closer to 4%”.

While 5% is a relatively ambitious target for China, it would be too strong for the US and other advanced economies, far short of the double-digit growth seen as the country's economy transformed into a manufacturing powerhouse.

“Achieving this year's goals will not be easy,” Li said, not to mention other goals including boosting economic growth and incomes, creating 12 million jobs and making the economy more energy-efficient in pursuit of climate goals.

China has set a target of 2.5% to reduce its energy consumption after failing to meet the target of a 2% reduction by 2023.

Xi Jinping, China's most powerful leader in decades, also heads the party installed loyalists like Li in high positions To strengthen its grip on the economy and society. Xi, 70, is in his third five-year term as party general secretary and could hold the post for life.

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The meetings of the National Congress last about a week and are China's biggest political events of the year. The Congress not only endorses the policies already laid down by the top leaders, but it provides a platform to showcase the achievements of the party and build support for its aims.

Leaders are stressing the need to boost consumer spending to drive the economy. But the consumption-led recovery it was counting on after the end of anti-epidemic restrictions in late 2022 has faded and most forecasts growth will slow this year.

Falling home prices and worries about jobs have left many families reluctant or unable to spend more. China's real estate market is in crisis as many developers default on their loans following excessive borrowing.

He said the government would mitigate such risks and provide support to local governments under financial pressure from higher spending on anti-virus measures and lower tax revenues due to a fall in land title sales.

Li said China should not lose sight of “bad situations”.

But he reiterated calls for greater optimism despite China's challenges, citing the country's vast market of about 1.4 billion people, its advanced manufacturing capacity and its massive workforce.

“The underlying trend of economic recovery and long-term growth remains unchanged and will not change,” he said. “So we have to be more confident and more sure of ourselves.”

Among dozens of projects listed by Li in his roughly 30-page Chinese-language report — 55 pages in English — China is planning a “concern-free consumption” program this year. Families will be encouraged to trade in old cars and household appliances and buy new cars.

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Li also said the government would focus on employment, a pressing concern for many young Chinese whose jobs have become more precarious during the pandemic and who struggle to find work after leaving school. Programs include unemployment insurance and other social support, loans and grants to companies that create more jobs.

The government plans to provide support to local governments facing “economic difficulty,” Beijing said, to mitigate the damage caused by sharply rising cash-strapped cities and regions' debts.


Associated Press writer Huisong Wu and researchers Yu Bing and Chen Wanqing contributed to the report.

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