China sets 2023 GDP target of about 5%

China has set a low target for 2023 economic growth of around five percent on Sunday during the annual session of its National People’s Congress (NPC).

The country’s economy’s 2022 performance was its weakest in decades, as the GDP grew by three percent, following the COVID pandemic, a property sector crisis and a crackdown on private enterprise.

China is in need for economic stability and consumption increase, setting a target for urban jobs this year of 12 million, which was 11 million in 2022, said Premier Li Keqiang in his work report. The country should also beware of the pre-existing risks in the real estate sector, Keqiang added.

“The foundation for stable growth needs to be consolidated, insufficient demand remains a pronounced problem, and the expectations of private investors and businesses are unstable,” said Li during his opening speech at the parliament.

Li set a budget deficit target at three percent of GDP, a little higher than last year’s goal of 2.8 percent. The growth target for 2023 is below expectations, as it was previously expected to reach six percent, and is lower than last year’s target of 5.5 percent.

Setting a higher growth target would have required massive stimulus, worsen the structural imbalances the country is trying to deal with to achieve its long-term development goals, said Alfredo Montufar-Helu, head of the China Center at the Conference Board.

A lower target is more achievable and recognises that the Chinese economy will be dealing with significant economic challenges, Helu added.

China aims to increase the incomes of low earners and bring more people in the middle income group, planning measures to increase consumption, but stayed away from direct spending like cash handouts, said China’s state planner.

The government is planning to keep its spending budget on infrastructure the same, increasing funding for big projects to 3.8 trillion Yuan in special local government bonds, which was 3.65 Yuan last year.

Li and other officials are set to retire during the congress, while former Shanghai party chief, Li Qiang is expected to take over as premier.