China Sets 'Around 5%' Economic Growth Target Again This Year... External Channels Remain 'Closed'

'5% Growth' Economic Soft Landing Margin
Challenging Target Due to No Base Effect
Closed Approach by Eliminating Prime Minister's Press Conference

China has set its domestic gross domestic product (GDP) growth target for this year at around 5.0%, the same as last year. This is interpreted as establishing a margin for a soft landing, considering the conditions that make a strong recovery and rebound in the Chinese economy unlikely. However, there are assessments that the results may be limited due to worsening US-China tensions after this year’s US presidential election, the ongoing real estate market crisis, and local government debt issues.

Li Qiang, Premier of the State Council of China, announced the economic growth target of around 5.0% for this year during the work report at the opening ceremony of the National People's Congress (NPC) held at the Great Hall of the People in Beijing on the 5th. This aligns with previous market expectations but falls below the forecast of China’s leading think tank, the Chinese Academy of Social Sciences (5.3%), and the weighted average of regional growth targets (5.3%).

Conservative Fiscal Deficit Rate...No Expectation for Aggressive Monetary Easing

This target is the same figure for the second consecutive year following last year and is also one of the lowest in history except for 1991 (4.5%). China set a growth target of around 5.0% in the first year of the post-COVID-19 era last year, and the actual growth rate was 5.2%. However, unlike last year, it is considered a somewhat challenging target given that the base effect cannot be expected.

The fiscal deficit target announced together on the same day was set at 3.0% of GDP, with a deficit budget size of 4.06 trillion yuan (approximately 749.9226 trillion KRW). This is also the same figure as last year (3.0%) but significantly lower than the actual fiscal deficit rate of 3.8% last year.

Earlier, there were market expectations that the Chinese government would set the fiscal deficit target slightly higher than last year at around 3.5%. In particular, if it had been raised to 4.0%, it was expected to signal active fiscal stimulus, but it is interpreted that the government’s fiscal policy will proceed with a more conservative scenario.

[Image source=AFP Yonhap News]

The local special bond quota was raised to 3.9 trillion yuan from 3.8 trillion yuan the previous year but fell short of the market expectation of around 4 trillion yuan. However, it is expected that an ultra-long-term special government bond of 1 trillion yuan will be issued to provide emergency funding as needed.

The urban unemployment rate was set at 5.5%, the same figure for the fifth consecutive year since 2020. After lowering it by 1.0 percentage point from 2019 (within 4.5%), it is considered difficult to quickly recover from the scars in the employment market caused by the zero-COVID policy. The number of new urban jobs was maintained at 12 million, the same as last year.

The consumer price index (CPI) target was set at around a 3% increase, the same figure for the fourth consecutive year since 2021. This is interpreted as an effort to overcome recent deflation (price decline accompanied by economic recession) concerns and to raise prices by driving demand. In January, the CPI (-0.8%) recorded the largest decline since 2009, and the producer price index (-2.5%) fell for 16 consecutive months.

[Image source=AP Yonhap News]

Defense Budget Expanded by 7.2%...Increasing Information Secrecy

The Chinese government announced a defense budget of 1.6655 trillion yuan this year, a 7.2% increase from the previous year, following last year’s increase. This slightly exceeds the previous annual increases of 6.8% in 2021 and 7.1% in 2022. It also reaffirms the existing policy of prioritizing defense spending despite the ongoing economic downturn in China.

At a press conference during the second session of the 14th NPC the day before, Lou Qinjian, spokesperson for the NPC, stated, "In recent years, China has reasonably and steadily increased defense spending to safeguard national sovereignty, security, and development interests, adapt to the demands of military reform with Chinese characteristics, and better fulfill major countries’ international responsibilities and obligations." He added, "Compared to major military powers including the United States, China’s defense budget has always been relatively low in terms of GDP and national fiscal expenditure ratio, per capita defense spending, and per soldier defense spending."

While China repeatedly emphasizes external openness, it appears to be intensifying its internal information secrecy. At the press conference, Lou said, "Starting this year, there will be no press conference by the Premier after the NPC closes." He further explained, "The content of the NPC will be disclosed to the public later, and the media center will respond to foreign journalists’ questions through ministerial-level press conferences and leadership meetings of relevant State Council departments."

Accordingly, the Premier’s NPC closing press conference, which has been regularized since Premier Zhu Rongji’s era in 1993, is likely to be effectively abolished after about 30 years. The Premier of the State Council, China’s second-highest-ranking official and head of the central government, has traditionally delivered the government work report on the opening day of the annual NPC meeting and held a concluding press conference with domestic and foreign media on the closing day. Given Lou’s remark that "unless something special happens, there will be no Premier press conference after the NPC for the next several years," some speculate that there may be no such conference until March 2028, when President Xi Jinping’s term ends.

The Premier’s closing press conference, broadcast live, is a very rare opportunity for China’s highest-level officials to directly answer questions from foreign journalists. This has been interpreted both domestically and internationally as a sign of severed communication with overseas media and a reduction in the presence of China’s second-ranking economic commander.

Chung Jai-an, a professor of political science at the National University of Singapore, pointed out to Bloomberg News, "With increasing restrictions on data accessibility, it is becoming increasingly difficult to independently verify the extent or speed of China’s economic growth."

This content was produced with the assistance of AI translation services.