Skip to content

China Sets Modest Economic Growth Target of 5% for 2023

China set a modest target for economic growth this year of around 5% as the annual session of its National People's Congress (NPC) opened on Sunday. The NPC is poised to implement the most significant government shake-up in a decade.

National People's Congress
National People's Congress

Weak Performance in 2020 Leads to Economic Stability Goals

The Chinese economy gave one of its weakest performances in decades last year, with a gross domestic product (GDP) growth of only 3%. This was due to COVID controls, a crisis in the property sector, and a crackdown on private enterprise. Outgoing Premier Li Keqiang stressed the need for economic stability and expanding consumption in his work report. He set a goal to create around 12 million urban jobs this year and warned of risks in the real estate sector.

Budget Deficit Target and Global Challenges

Li set a budget deficit target of 3.0% of GDP, wider than last year's goal of around 2.8%. He acknowledged global challenges such as high inflation, declining global economic and trade growth, and external attempts to suppress China. At home, he recognized the need to consolidate stable growth, address insufficient demand, and stabilize private investor and business expectations.

Lower Growth Target Achievable

This year's growth target is at the low end of expectations, below last year's target of around 5.5%. Alfredo Montufar-Helu, head of the China Center at the Conference Board, said the lower target is more achievable and recognizes China's economic headwinds this year. The state planner aims to increase low-earner incomes and bring more people into the middle-income group while spurring consumption without direct spending.

Government's Growth Strategy

The government plans to stick with its infrastructure spending playbook to bolster growth. It will increase funding for big-ticket projects with 3.8 trillion yuan ($550 billion) in special local government bonds, up from last year's 3.65 trillion yuan.

Xi Jinping
Xi Jinping

Leadership Changes and Reforms

Outgoing Premier Li Keqiang and other reform-oriented policy officials will retire during the congress, making way for President Xi Jinping's loyalists. Former Shanghai party chief Li Qiang is expected to be confirmed as premier and tasked with reinvigorating the economy. The rubber-stamp parliament will also discuss Xi's plans for reorganizing state and Communist Party entities, with a deeper Communist Party penetration expected.

Military Budget and Cross-Strait Relations

Li announced a 7.2% increase in defense spending this year, exceeding expected GDP growth. In Taiwan, he promoted the peaceful development of cross-Strait relations and the peaceful reunification of China while opposing Taiwan's independence.

Challenges Ahead

China faces multiple challenges, including strained relations with the US, a worsening demographic outlook, and decreased fertility. The state planner aims to lower the costs of childbirth, childcare, and education and actively respond to an aging population and decrease in fertility. The NPC opened with tight security amid 2,948 delegates gathered in the Great Hall of the People. The session will vote on institutional reforms and decide on a new cabinet line-up for the next five years.