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China sets robust economic growth goal but no big bang stimulus. Economic growth target at about 5%. Defense spending to climb 7.2%. The simplified version of the government work report

The State Council Information Office held a briefing on the morning of March 5. Huang Shouhong, head of the "Government Work Report" drafting team and director of the State Council Research Office, interpreted the "Government Work Report" and answered reporters' questions. Huang Shouhong said that this year we have set the economic growth target at about 5%. This is based on comprehensive consideration of various factors, including domestic and international situations, including needs and possibilities. It can be said that it is based on the current situation and is formulated with a long-term perspective.

Huang Shouhong said that the "Report" states that overall, opportunities outweigh challenges, and favorable conditions outweigh unfavorable factors. The economic growth rate reached 5.2% last year, and it is entirely possible to achieve a growth rate of about 5% this year. Of course, many things must be achieved through hard work. Also this morning, Premier Li Qiang delivered a government work report to the Second Session of the 14th National People's Congress. China defense spending to climb 7.2% amid rivalry with US China today announced a 7.2% hike in its defense budget for the coming year, the same rate of increase as the previous year, as Beijing continues to modernize its military amid rivalry with the United States and its network of allies. The 1.67 trillion yuan ($231.4 billion) outlay, noted in a report outlined by Premier Li Qiang at the annual session of China’s National People’s Congress (NPC), makes 2024 the ninth straight year to see a single-digit hike in the country’s defense budget.

China’s top leaders Tuesday set an ambitious target for economic growth but signaled only modest stimulus measures, not the aggressive support for China’s domestic economy that many analysts believe is necessary to halt a steep slide in the housing market and ease consumer malaise and investor wariness.

Premier Li Qiang, the country’s No. 2 official, after Xi Jinping, said in his report to the annual session of the legislature that the government would seek economic growth of "around 5%.” That is the same target that China’s leadership set for last year, when official statistics ended up showing that the country’s gross domestic product grew 5.2%.

The country’s program for state spending showed little change. Li said that the central government’s deficit would be set at 3% of economic output, but that the government was ready to issue another $140 billion worth of bonds to pay for unspecified projects of national importance. The more the government borrows, the more it can spend on initiatives that could boost the economy.

China had also set the deficit at 3% early last year, before raising it in October to 3.8% when the government approved $140 billion in additional bonds to pay for disaster relief and prevention measures after severe summer flooding.

Conspicuously missing from the premier’s agenda for this year was a move to shore up the country’s social safety net or introduce other policies, such as vouchers or coupons, that would directly address Chinese consumers’ very weak confidence and unwillingness to spend money.

"There’s a lot of positive noises for the economy, but not a lot of concrete proposals for how to resolve the country’s growth difficulties,” said Neil Thomas, a fellow at the Center for China Analysis of the Asia Society.

Some economists question whether growth was actually as high last year as China claims. In addition, last year brought a modest rebound because stringent "zero COVID” measures were in place until December 2022. Achieving the same growth this year, without the benefit of that rebound, could be much harder.

Consumers and investors have been skeptical about the prospects for a lasting recovery. Stock markets in China fell heavily in January and early February, before recovering over the past four weeks, as the government took steps to encourage stock buying. But Li maintained that China was on the right track.

China has "withstood external pressures and overcome internal hardships,” Li told the National People’s Congress, a Communist Party-controlled body that approves laws and budgets. "The economy is generally rebounding.”

The National People’s Congress, a choreographed weeklong event, typically focuses on the government’s near-term initiatives, especially economic objectives. China’s growth goal, and the ways that the government is attempting to achieve it, are under intense international scrutiny this year.

Communist Party leaders are trying to restore confidence in China’s long-term prospects and to harness new drivers of growth, such as clean energy and electric vehicles. Li’s report also flagged new spending on artificial intelligence and a plan to "step up research on disruptive and frontier technologies.”

But those efforts could be dragged down by a tangle of problems around the housing sector: a glut of apartments, debt-troubled property companies and local governments, and homebuyers reluctant to sink money into real estate when values are declining.

Achieving China’s growth target this year may be difficult without another big round of debt-fueled state spending. The amount in the report, said Eswar Prasad, a Cornell University economist, "is not a massive amount for an economy of China’s size, but I think they are being cautious about opening the taps too wide before seeing if this type of financing has the desired effects.”

Economists and global lending agencies have long recommended that China strengthen its safety net, a shift that could improve weak consumer confidence and persuade Chinese households to save less and start spending more.

But officials have been leery of increasing social spending when they already need to figure out how to cope with an aging society with fewer workers to support each senior. China’s birthrate has nearly halved since 2016 and about 15% of the population is age 65 or older — a figure likely to grow to more than 20% by 2030.

For each of the past four years, China has retroactively revised its initial economic growth numbers slightly lower. That makes it easier for the government to say the next year that the economy has grown in line with official targets. But it does not fix underlying economic troubles.

China’s economy is also facing strong forces from outside its borders. Government officials in the United States and Europe are working to contain Chinese trade practices they consider to be unfair or national security threats. And many executives at multinationals remain troubled by an ever-growing emphasis on domestic security that Beijing has adopted in more than a decade of rule by Xi.

Also this morning, Premier Li Qiang delivered a government work report to the Second Session of the 14th National People's Congress.

The key points are as follows:

1. Work review in 2023

GDP grew by 5.2%

Grain output is 1.39 trillion catties

12.44 million new urban jobs created

New tax incentives for the whole year exceeded 2.2 trillion yuan

New energy vehicle production and sales account for more than 60% of the world’s total

Exports of the "three new products" of electric vehicles, lithium batteries and photovoltaic products increased by nearly 30%

2. Main expected goals for this year

GDP growth is about 5%

More than 12 million new urban jobs created

Consumer prices increased by about 3%

Grain output exceeds 1.3 trillion catties

Energy consumption per unit of GDP is reduced by about 2.5%

3. Some key tasks this year

Finance: The deficit rate is planned to be set at 3%. General public budget expenditure increased by 1.1 trillion yuan compared with the previous year

Government investment: It is planned to arrange 3.9 trillion yuan in local government special bonds. Investment within the central budget is planned to be 700 billion yuan

Special treasury bonds: Starting from this year, it is planned to issue ultra-long-term special treasury bonds for several consecutive years, specifically for the implementation of major national strategies and the construction of security capabilities in key areas. This year, 1 trillion yuan will be issued first.

Future industries: opening up new tracks such as quantum technology and life sciences

Digital economy: Carry out "artificial intelligence +" action

Consumption: Encourage and promote the replacement of old consumer goods with new ones, and boost bulk consumption such as intelligent connected new energy vehicles and electronic products.

Housing: Increase the construction and supply of affordable housing and improve the basic systems related to commercial housing

Employment: Policies and measures to promote youth employment should be strengthened. Classified and improved flexible employment service guarantee measures

Rural revitalization: Implement insurance policies for the production costs and income of three major staple grains across the country. Strengthen the construction of charging piles, cold chain logistics, and delivery and distribution facilities

Urbanization: Steady implementation of urban renewal actions. Promote solutions to problems such as installing elevators and parking in old communities

Education: Carry out actions to expand and improve the quality of basic education. Promote the inclusive development of preschool education

Medical insurance: The per capita financial subsidy standard for resident medical insurance is increased by 30 yuan

Social security: The monthly minimum standard of basic pension for urban and rural residents will be increased by 20 yuan, and the basic pension for retirees will continue to be increased. Implement a personal pension system across the country. Increase the supply of childcare services through multiple channels

Opening up: Comprehensively remove restrictions on foreign investment in the manufacturing sector, and relax market access in telecommunications, medical and other service industries. Improve the convenience for foreigners to work, study and travel in China

Environmental protection: Improve fiscal, taxation, finance, investment, price policies and related market mechanisms to support green development.

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