Beijing is aiming for a moderate growth rate of 5% in 2023

China has announced its lowest growth target in decades, amid a host of domestic and external challenges.

Beijing is targeting economic growth of five per cent in 2023, one of its lowest targets in decades, which was unveiled yesterday by outgoing Chinese Premier, Li Keqiang, speaking at the opening of the National People’s Congress (NPC).

The conservative target comes as Beijing seeks to rejuvenate the world’s second-biggest economy after scrapping its “zero-COVID” policy of lockdowns, mass testing and quarantine late last year.

China’s economy officially grew three per cent in 2022, well short of the target of 5.5 per cent, as tough pandemic restrictions, a property market slump, government crackdowns on private enterprise, and the United States-China trade war dragged on growth. Most economists believe that China will be able to hit, and perhaps exceed five per cent growth in 2023, especially with the economy coming off a low base last year.

Natixis’s García-Herrero said China’s economy will probably expand more than five per cent this year, explaining: “I would say they know the economy is not going to grow eight per cent or anything like that, but surely about five.”

Manufacturing star performer

Although China’s economy appears to be rebounding strongly from the pandemic – manufacturing activity in February, for example, smashed expectations, expanding at the fastest pace in more than a decade – Chinese officials have warned of risks ahead.

While acknowledging China’s vast potential and momentum for further growth, Li pointed to the rise of “uncertainties in the external environment,” including high inflation, and “external attempts to suppress and contain China,” which is regarded as a thinly-veiled reference to the country’s heated geopolitical competition with the US.

China’s economy faces serious long-term challenges domestically, too, including an enormous housing bubble and a shrinking working population due to a rock-bottom birth rate. Many economists believe that China’s high-growth era, characterised by decades of double-digit expansion each year is now in the past.

In a report released in March last year, the Australian think tank Lowy Institute predicted the Chinese economy will grow an average of 2-3 per cent each year until 2050 casting doubt on long-held assumptions China will overtake the US as rhe world’s biggest economy in the coming decades. Li said the government would aim for a fiscal deficit of three per cent relative to the gross domestic product (GDP) in 2023, up slightly from 2.8 per cent last year.

He also put heavy emphasis on job creation, setting out a goal of 12 million new urban jobs in 2023, up from a target of 11 million jobs in 2022.

During the opening of the NPC, which the ruling Communist Party will choose its leaders for the next five years, Li indicated that Beijing would not lean heavily on government coffers to stimulate growth, stressing the need to revive private consumption and stabilize spending on “big-ticket items”.

Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong, commented that the modest target may also be a holdover from the more pessimistic economic outlook that held sway during the Central Economic Working Conference in December.

“Global outlook was more challenging back then, with the US and Europe on the edge of recessions,” he told Al Jazeera.

He added that “China’s economic recovery was also unclear. Given the complete reshuffling of the government, a key issue to watch in the next few months is how the new leaders will boost private sector confidence. This is more important than the fiscal and monetary policies, in my view”.