China sets GDP growth target of 'around 5.5%', lowest in decades

Delegates arrive for the opening session of the National People's Congress at the Great Hall of the People in Beijing, on March 5, 2022. PHOTO: AFP

BEIJING - China has set a modest growth target of "around 5.5 per cent" for this year, as top policymakers grapple with global uncertainties brought on by Russia's invasion of Ukraine and the ongoing coronavirus pandemic, and domestic troubles in its housing market.

This level of growth will be the lowest in more than three decades for the world's second-largest economy, discounting 2020 when Covid-19 erupted and capped expansion at 2.2 per cent.

Last year, it managed to outperform its target of "above 6 per cent" by growing 8.1 per cent on the back of strong exports, fixed assets investments and retail sales in the first quarter.

But growth sputtered later in the year, dragged down by a severe credit crunch in the property sector, power shortages and sporadic Covid-19 outbreaks across the country.

The gross domestic product (GDP) growth target is set out in this year’s annual work report that Premier Li Keqiang delivered to 2,800 lawmakers, who have arrived from all parts of the country in the capital city for the annual meeting of China’s top legislature, the National People’s Congress (NPC), which starts today (March 5). 

Job targets, property market 

Other targets include creating more than 11 million new urban jobs, capping urban unemployment rate at 5.5 per cent and limiting inflation to around 3 per cent - similar to aims that China set for last year as well.

Last year, China created 12.69 million urban jobs and limited the urban unemployment rate to 5.1 per cent, while inflation increased by 0.9 per cent.

This year, a record 10.76 million graduates are expected to enter the job market, up from the 9.09 million last year. 

Mr Li said the government would provide “stronger policy support and uninterrupted services” to ensure new jobseekers can find employment or start businesses. 

The deficit-to-GDP ratio is set at 2.8 per cent for this year, slightly lower than the 3.2 per cent set last year. 

Mr Li is due to step down after serving two five-year terms as prime minister. 

In his presentation on Saturday, Mr Li painted a gloomier outlook for the economy, even as he strove to strike a positive note. 

“This year, our country will encounter more risks and challenges, and we must keep pushing to overcome them,” he said. “We must make economic stability our top priority and pursue progress while ensuring stability.”  

In the past year, China’s growth has been dragged down by a regulatory clampdown on its property sector, which makes up about a third of its economy. 

Policymakers have tried to cool runaway housing prices as part of a policy that emphasises “houses are for living in, not for speculation”. 

Sales at China's 100 biggest developers fell about 40 per cent in January from a year earlier, compared with a 35 per cent dip in December, according to preliminary data by China Real Estate Information Corp.

A number of Chinese developers, including the heavily indebted Evergrande, are in default.

Mr Li said the government would “move faster” to develop the long-term rental market, promote the construction of government-subsidised housing and support commodity housing. 

Covid-19, Russian invasion weigh on economy  

China is also the last major economy to insist on a strict zero Covid-19 approach even as many countries, including its biggest rival the United States, have lifted border restrictions to spur growth.

Sudden lockdowns, tight border controls and mass testing have disrupted economic activity last year.

For example, the highly contagious Covid-19 Delta variant, which may have been brought into China in July last year, caused retail sales in August to grow by only 2.5 per cent from a year ago, a sharp slowdown from the 8.5 per cent uptick recorded in July.

A reason for the slower growth was due to the Delta variant outbreaks, Chinese authorities said, as Beijing locked down cities and cancelled flights.

The national legislature's spokesman Zhang Yesui acknowledged on Friday that tough Covid-19 measures had "put some strain" on businesses and industries, but said the impact was short-term.

"Any containment measure will come at a cost, but compared with the lives, safety and health of people, these costs are worthwhile," he told reporters at a news conference ahead of the NPC opening.

Meanwhile, Russia's military aggression in Ukraine has dimmed global outlook as tough sanctions imposed on Moscow by major governments in the West take effect.

Prices of oil, grains and metals have surged, since Russia is a major player in oil exports and both Russia and Ukraine export wheat, corn and a number of essential metals.

China is Russia's and Ukraine's largest trading partner.

Dr Scott Kennedy, a senior adviser at the Centre for Strategic and International Studies in the US, wrote in a note on Thursday that Chinese companies will face losses as part of China's trade with Russia and Ukraine will be hit by the invasion and subsequent sanctions.

"There are almost no scenarios in which China comes out net ahead," Dr Kennedy said, pointing out that "the real danger here is whether China would risk becoming the target of... sanctions in order to maintain its support for Moscow".

China's economy could be hit "with substantial penalties that would be more challenging to absorb" if it undermined the sanctions, he added.

Officials have signalled in the past months that the Chinese economy faces serious challenges.

In December, top policymakers said after a Politburo meeting chaired by President Xi Jinping that China will prioritise stability when making decisions about the economy.

Subsequently, a statement released after the closely-watched annual Central Economic Work Conference - which sets the government's economic agenda - named the three challenges that the country faces this year: declining demand, supply shocks and a gloomier global outlook.

The International Monetary Fund expects China's economy to grow 4.8 per cent this year, while the World Bank projects a higher 5.1 per cent expansion.

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