China has set an ambitious 5.5 per cent target for economic growth this year despite the many challenges it faces. First of all, the Chinese economy is slowing down after a rebound last year from the Covid-19 pandemic. After growing a whopping 18.3 per cent in the first quarter of last year, it started slowing, with the third and fourth quarters registering 4.9 per cent and 4 per cent growth respectively. The new growth target of 5.5 per cent, although the lowest since 1991, is above the forecasts of the World Bank of 5.1 per cent and the International Monetary Fund of 4.8 per cent. Achieving this goal will be an uphill task, Chinese Premier Li Keqiang admitted. It will require arduous efforts, he said during his presentation of the government work report last week at the opening of the annual legislative meetings.
The government's job has been made much harder by the economic fallout from the war in Ukraine, partly as a result of harsh international sanctions imposed on Russia for its invasion. The World Bank is already predicting that high oil prices could shave a full percentage point off the growth of large oil-importing countries, including China. Add to that more disruptions to supply chains, already in disarray from the pandemic, and spikes in prices of commodities such as copper, nickel and wheat, all of which are major imports of China, and the headwinds are strong indeed.