At the National People’s Congress (NPC) meeting on Saturday, China set its economic growth target at around 5.5% this year—the lowest growth target in 3 decades. By contrast, the country hiked its annual defense budget by 7.1%.
Presenting the government work report at the meeting, Premier Li Kequiang announced that China would target 2022 GDP growth of around 5.5%, which is the lowest level since 1990 if excluding the Covid pandemic year of 2020.
Last year, the world’s second-largest economy grew 8.1% compared to its modest targets of “above 6%.” However, the pace of expansion slowed sharply to 4% in the final quarter of the year.
There are various opinions from analysts and researchers, most of whom showed their concern about China’s economic prospects.
Zong Liang, the chief researcher at Bank of China, said, “It may be a bit difficult to achieve the target, and we need to take some measures to achieve it.”
Zhang Zhiwei, the chief economist at Pinpoint Asset Management Ltd., commented, “It will be a challenging year for the government to achieve this growth target. The housing sector is slowing down, and the Covid pandemic has constrained the service sector severely.”
Given the continuous shrinkage of the housing sector, the slowdown in export growth, and the increasingly costly zero-Covid plan, Nomura analysts led by Lu Ting are “skeptical” that China can attain 5.5% growth.
Chang Shu and David Qu from Bloomberg Economics shared their ideas in a report, saying: “The message from the National People’s Congress is clear—China’s government is determined to prevent growth slipping too much this year.” They added that the modest goal “signals an intent to stabilize an economy facing fierce pressures from a property slump and new risks from the Russia-Ukraine war. The budget targets look conservative on the surface—but leave substantial room for the stimulus that could be even more forceful than the support it delivered in 2020 to cushion the pandemic blow.”
Meanwhile, the Ministry of Finance planned to raise defense spending by 7.1% to $230 billion this year. According to CNBC, this figure is faster than the 6.6% and 6.8% increases in 2020 and 2021, respectively.
Premier Li said in the meeting that China would move faster to modernize the military’s logistics and asset management system and build a modern weaponry and equipment management system.