China has set a modest growth target of around 5% at the opening of parliament

BEIJING, March 5 (Reuters) – China on Sunday set a modest economic growth target of around 5% for this year as it kicked off the annual session of its National People’s Congress (NPC), which is poised to experience the biggest government shakeup. to implement. up in a decade.

China’s gross domestic product (GDP) grew just 3% last year, one of its worst results in decades, weighed down by three years of COVID-19 restrictions, a crisis in the huge real estate sector, a crackdown on private enterprises and a declining demand for Chinese exports.

In his work report, outgoing Premier Li Keqiang stressed the need for economic stability and increasing consumption, aiming to create about 12 million urban jobs this year, compared to last year’s target of at least 11 million, and warned that risks remain in the real estate industry.

Li set a budget deficit target of 3.0% of GDP, which was broader than last year’s target of about 2.8%.

“We must prioritize the recovery and expansion of consumption,” said Li, speaking just under an hour in a speech to open parliament, which runs through March 13.

“Incomes of urban and rural residents need to be boosted through multiple channels. We need to stabilize spending on major items and promote recovery in consumer services consumption,” he said.

The growth target of around 5% for this year was on the low side of expectations, as policy sources had recently told Reuters that a range of up to 6% could be seen. It is also below last year’s target of about 5.5%.

“While the official growth target has been lowered for the second consecutive year, which could be a disappointment to the market, we think investors (should) pay attention to the underlying growth momentum to gauge the pace of recovery,” said Zhou Hao, economist at Guotai Junan International.

Li and a string of more reform-focused economic policy officials will retire during the congress, making way for loyalists of President Xi Jinping, who further tightened his grip on power as he secured a precedent-breaking third term of leadership at the Communist Party from October . Congress.

During the NPC, former Shanghai party chief Li Qiang, a longtime ally of Xi, is expected to be confirmed as prime minister, tasked with reviving the world’s second-largest economy.

The rubber stamp parliament will also discuss Xi’s plans for an “intensive” and “broad” reorganization of state and Communist Party entities, state media reported Tuesday, with analysts expecting a further deepening of the Communist Party’s penetration into state organs.

MILITARY BUDGET INCREASE

Li said China’s armed forces should spend more energy on training in combat conditions and increasing combat readiness, and the budget included a 7.2% increase in defense spending this year, a slightly larger increase than budgeted up 7.1% from last year and once again exceeding expected GDP growth.

On Taiwan, Li struck a moderate tone, saying that China should promote the peaceful development of relations between the two sides of the Strait and promote the process of China’s “peaceful reunification”, but also take decisive steps to oppose independence from Taiwan.

Beijing faces a host of challenges, including increasingly fraught relations with the United States and deteriorating demographic prospects, with birth rates falling and population falling last year for the first time since the 1961 famine year.

China plans to reduce costs of childbirth, childcare and education and will actively respond to an aging population and decline in fertility, the country’s state planner said in a work report released on Sunday.

The NPC opened on a smoggy day amid tight security in the Chinese capital, with 2,948 delegates gathered in the cavernous Great Hall of the People on the west side of Tiananmen Square.

During the session, China’s legislature will vote on a plan to reform institutions under the State Council or cabinet, and decide on a new cabinet formation for the next five years, according to a meeting agenda.

It is the first NPC gathering since China abruptly dropped its zero-COVID policy in December, following rare nationwide protests. Aside from the pandemic-shortened meetings of the past three years, this year’s session will be the shortest in at least 40 years, according to NPC Observer, a blog.

Additional coverage by the Beijing newsroom; Written by Tony Munroe; Edited by Himani Sarkar, William Mallard and Simon Cameron-Moore

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