China set its 2023 economic growth target at around 5%, a target more modest than some had previously projected as the nation’s leadership takes into account a wide range of difficulties besetting the world’s second-largest economy.
The figure was unveiled in Premier Li Keqiang’s final government work report delivered Sunday morning, according to the official Xinhua News Agency. The announcement comes at the start of China’s National People’s Congress, the country’s annual parliamentary gathering, which will last more than a week.
The GDP target builds on a low base effect in 2022, when the economy, which had been battered by repeated Covid restrictions, grew just 3%—missing its previous expansion goal of around 5.5% by a wide margin.
Before the NPC’s opening session, economists had mostly expected an acceleration in growth to more than 5% due in large part to the faster-than-expected exit from “zero Covid” and a rebound in domestic consumption. A Reuters report published Thursday said the government was even considering lifting its 2023 GDP target to as high as 6%, as officials sought to boost market and consumer confidence.
“The around 5% goal is more reasonable,” says Shen Meng, managing director of Beijing-based boutique investment bank Chanson & Co. “It is more in line with downward pressures including a weakening in exports and consumption.”
Shen says the government, partly due to concerns about inflation, probably won’t resort to large-scale stimulus measures. China’s economy already showed signs of recovery in March, when the National Bureau of Statistics announced that the manufacturing purchasing managers’ index (PMI) rose to 52.6 in February—which is its highest reading since April 2021. The stronger-than-expected figure had sparked a rally in the Hong Kong stocks.
To further bolster growth and shore up market confidence, Li said China would support the development of platform companies, deepen reform of state-owned enterprises and encourage the private sector to become bigger and stronger.
His remarks echo the return to pragmatism that came after President Xi Jinping secured a precedent-breaking third term in office during the 20th party congress last October. Li, in the meantime, is widely expected to be succeeded by Xi’s loyalist Li Qiang, who was previously the party secretary of Shanghai and oversaw the bruising month-long lockdown of the financial hub in 2022. The incoming Li, however, has also been lauded for his pro-business approach in the past, and has the trust of Xi which may give him greater autonomy in managing the economy.
The parliamentary meeting is also likely to see the retiring of other key officials including the reform-minded central bank governor Yi Gang, and Vice Premier Liu He, a Harvard University graduate who in 2013 had called for the market to play a “decisive” role in the economy.
They are expected to be replaced respectively by Xi’s close allies, Zhu Hexin, chairman of state-owned financial conglomerate Citic Group, and He Lifeng, head of the National Development and Reform Commission.
In spite of pledges to accelerate growth and strengthen market confidence, there appears to be lingering distrust of private entrepreneurs within the Communist Party. A number of technology billionaires, such as Tencent’s cofounder and the country’s third-richest person Pony Ma, aren’t included in the list of delegates attending the parliamentary sessions.
The absent moguls have held key positions in government advisory bodies in the past, and used the parliamentary meetings to champion policies like integrating digital technologies deeper into the real economy and accelerating the development of artificial intelligence as well as autonomous driving.
But last year, Tencent was hit by China’s sweeping crackdown on the tech sector, suffering from the lack of new game licenses as authorities were focused on solving social problems like gaming addiction among the country’s youth. The former attendees have been replaced by the likes of Zhang Suxin, chairman of Hong Kong-listed semiconductor maker Hua Hong, and Li Shushen, chip expert and president of the University of Chinese Academy of Sciences. The delegate lists are revised every five years.