China has set its sights on achieving an economic growth target of approximately 5% for the current year, a goal that some economists consider ambitious.
The aim comes amid various challenges confronting the nation’s economy, including a slowdown in the real estate market and waning investor confidence.
“There was little surprise that the GDP growth target was set at around 5% again, as lowering the target would have further weakened confidence. With that said, it will be a more challenging path to repeating 5% growth in 2024, as the base effect becomes less supportive, and as many of the boosts to the economy coming out of anti-pandemic measures will gradually wane. Real estate will likely remain a drag on the economy in 2024,” said Lynn Song, Chief Economist, Greater China at ING.
Maintaining the same growth target as the previous year, China acknowledges the necessity for robust government stimulus to realize this objective. The country heavily relies on state infrastructure investment, which has resulted in a substantial accumulation of municipal debt.
To bolster economic growth, China intends to reduce its budget deficit to 3% of economic output, down from the revised 3.8% recorded in the preceding year. Notably, the issuance of 1 trillion yuan in special ultra-long-term treasury bonds, not accounted for in the budget, is planned to support this effort.
“More stimulus needed to reach 5% GDP target,” said ZhaoPeng Xing,Senior China Strategist at ANZ who economic growth to be around 4.5% to 5%.
Additionally, the quota for special bond issuance for local governments has been set at 3.9 trillion yuan, slightly higher than the 3.8 trillion yuan allocated in 2023. China has also established a consumer inflation target of 3% and aims to create over 12 million urban jobs this year, while aiming to maintain the unemployment rate at around 5.5%, Reuters reported.
Following the announcement of these economic measures, mainland China and Hong Kong’s equities experienced declines, with Chinese blue chips CSI300 and Hong Kong’s Hang Seng falling by 0.2% and 1.3%, respectively.
Meanwhile, a private survey indicates that China’s services sector exhibited slower-than-expected growth in February. The Caixin services Purchasing Managers’ Index (PMI) dipped to 52.5 from January’s 52.7, falling below the forecasted 52.9. A PMI reading above 50 signals expansion in the sector.