China is planning to set aggressive growth targets for 2023 in an attempt to shore up investor and consumer confidence and make the most of a promising post-pandemic recovery, sources said.
The world’s second largest economy was likely to aim for growth up to 6%, four sources involved in policy discussions said. Three others said China was targeting 5%-5.5%. They all spoke on condition of anonymity as the discussions were held behind closed doors.
The final growth target, which can be a range, will be announced on Sunday March 5, at the start of China’s annual legislative meeting. Outgoing Premier Li Keqiang will deliver the 2023 government work report at the meet.
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None of the seven sources is involved in the final decision-making process.
The numbers point to rising optimism within Chinese policy circles compared with November. Government advisers had then recommended more modest targets ranging from 4.5% to 5.5%.
Those recommendations were made weeks before China lifted its zero-Covid regime, seen as the world’s harshest policy to curb Covid-19.
Aggressive targets often counter-productive
Some economists argue that ambitious annual growth targets in China are counterproductive. Policymakers should rather focus on structural reforms to improve the sustainability of any economic expansion, they say.
Lofty goals have in the past pressured local governments to launch expensive infrastructure projects. They contributed significantly to China’s overall indebtedness of almost 300% of economic output.
“This year’s growth target could be 5-6%,” one of the people involved in the discussions said. “We need to achieve an economic recovery, boost employment, and confidence, these are the key factors we need to consider.”
One of the three sources advocating for a more modest target warned “the property sector is still falling and it’s difficult to fill the gap while foreign trade is likely to drag on economic growth this year.”
Three of the sources also said China will stick to the longstanding inflation target of around 3%.
Strong start after big miss
China’s optimistic outlook comes after its dismal growth of 3% in 2022. It was the worst performance since 1976 – the final year of Mao Zedong’s decade-long Cultural Revolution that wrecked the economy.
It also follows encouraging data released on Wednesday that showed China’s manufacturing activity expanded at the fastest pace in more than a decade in February.
Iris Pang, chief Greater China economist at ING, said in a note the upbeat data gave the government strong reasons to set a high growth target of 5.5% to 6%.
To boost the economy further, Beijing is set to unveil more stimulus during this month’s National People’s Congress, four of the people said.
The government will aim to mitigate the impact of property market weakness and waning global demand for its exports.
To spur growth, the government is expected to widen its annual budget deficit to around 3% of gross domestic product this year and issue about 4 trillion yuan in special bonds to support investment spending, sources said.
The new economic leadership team, expected to be led by former Shanghai Communist Party chief Li Qiang as China’s new premier, are keen to show their ability to deliver better economic growth to create more jobs and ease funding strains on local governments, the four said.
- Reuters, with additional editing by Vishakha Saxena
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