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China sets ambitious economic growth target of ‘around 5%’ for 2024, vows to ‘transform’ economy

Chinese leader Xi Jinping (left) and Premier Li Qiang (right) at the opening session of the National People’s Congress in Beijing on March 5. Greg Baker/AFP/Getty Images

China has set an ambitious economic expansion target of “around 5%“ for 2024, as its leaders vowed to “transform the growth model” in the face of significant challenges facing its development.

The figure — similar to last year’s growth target — was announced by Chinese Premier Li Qiang on Tuesday at the opening of the annual gathering of the National People’s Congress (NPC), the country’s rubber-stamp legislature, which draws nearly 3,000 delegates to Beijing for a week-long meeting.

“Stability is of overall importance, as it is the basis for everything we do,” Li said during the delivery of his maiden work report.

“Making progress is our goal, and it is also what motivates us,” he said. “In particular, we must push ahead with transforming the growth model, making structural adjustments, improving quality, and enhancing performance.”

Li’s proclamation comes as Beijing is seeking to boost confidence in China’s economy, while grappling with how to stabilize the troubled property sector, counter deflationary pressures, reverse a foreign capital exodus and save a battered stock market.

Li delivered the report to an auditorium filled with delegates inside the cavernous Great Hall of the People. Delegates clapped in unison in time with a military band serenade as top leadership entered the room in a line led by Chinese leader Xi Jinping, who had state media cameras trained on him as he sat at the center of top officials on stage.

The political heart of Beijing, where the event is taking place, was under heavy security ahead of the event, with barricades and traffic controls restricting access to the public square and surrounding government buildings.

At the event, China also unveiled its annual military budget for 2024, which will increase by 7.2% to 1.67 trillion yuan ($230.6 billion), according to the draft budget report released separately on Tuesday. The growth rate for the defense budget is the same as last year’s.

The gross domestic product (GDP) target and military spending are among the most closely watched figures during the opening day of proceedings.

The GDP target in particular is being closely monitored this year as China faces a raft of economic problems. The 5% target was widely expected by analysts ahead of the gathering, who said leaders would use the ambitious goal to signal they are committed to boosting China’s slowing economy and restoring confidence in its economic prospects.

Soldiers dressed as ushers stand guard outside the Great Hall of the People ahead of the opening of the NPC in Beijing. Andy Wong/AP

A highly ambitious target

A target of “around 5%” is ambitious but achievable, said Larry Hu, chief China economist at Macquarie Group.

“They set such an ambitious target, likely because they want to boost the confidence and avoid a downward deflationary spiral … (It) entails more aggressive easing measures than last year. As a result, it may also improve the growth outlook among households and corporates,” he said.

Last year, China also set an “around 5%” target, in what was then the country’s lowest numerical target announced in decades. Earlier this year, it said economic growth had reached 5.2% in 2023.

Meeting a similar target in the coming year, however, could be significantly tougher. In 2022, Covid-19 restrictions in the country were rampant, setting a low base of comparison for last year.

Premier Li admitted that achieving the growth targets “will not be easy.”

“In setting the growth rate at around 5%, we have taken into account the need to boost employment and incomes and prevent and defuse risks,” he added.

China’s economic challenges have generated hardship and frustration as young people struggle to find jobs, investors grapple with market losses and small business owners fight to stay afloat.

Though it may be tough to reach in light of current headwinds, this year’s growth target suggests a major stimulus package for consumers may not be on the cards. Policymakers have been wary of such measures, even as weak consumer demand and deflationary pressures remain a drag on economic performance as people save instead of spend.

Recent years have seen national security interests, Covid-19 controls and efforts to tighten government control over industries like technology, entertainment and real estate all take priority for Xi over business growth and economic expansion.

But he and his top officials have been telegraphing in recent weeks that they would stay focused on growth, as part of a broader government push to repair broken business confidence and skepticism about Xi’s policy direction — and quash negative narratives.

As part of those strategic goals, China boosted its annual budget for science and technology by 10% to an unprecedented 370.8 billion yuan ($51.6 billion) — the biggest increase since 2019 after years of minimal growth.

“We will move faster to boost self-reliance and strength in science and technology,” Li said. “We will fully leverage the strengths of the new system for mobilizing resources nationwide to raise China’s capacity for innovation across the board.”

Li also vowed to bolster efforts in big data and artificial intelligence (AI) and launch a number of major science and technology programs.

The emphasis on self-reliance in science and technology comes after the United States tightened control over the export of cutting-edge technologies to China, especially in the field of AI, which Washington said could be used to strengthen the Chinese military.

The Biden administration has restricted American companies from selling advanced semiconductor chips to China and banned US investment in China in sensitive technologies including AI, quantum computing and semiconductors.

A bigger budget

China’s 7.2% growth rate in military spending is in line with several previous years of similar single-digit increases.

Beijing hasn’t announced double digit growth in military spending since 2015, when there was a push to revamp the armed forces.

Yun Sun, director of the China program at the Stimson Center think tank in Washington, said that given China’s economic slowdown, a 7.2% increase is fairly significant.

“The overall percentage of defense spending in GDP is still smaller than those of the US and Russia, but the ratio is nevertheless growing,” she said.

The US authorized an $886 billion defense budget for 2024, up about 3% from the previous year.

China’s leaders are watching what they see as an increasingly fractious geopolitical environment, ranging from America’s closer alliances with Beijing’s neighbors, growing friction with the Philippines over contested South China Sea waters and rising tension globally amid major conflicts in the Middle East and Ukraine.

Beijing has repeatedly pushed back against characterizations that it is aggressively ramping up military spending. Rather, it seeks to project an image of itself as a proponent of peace, despite its own aggression in places like the South China Sea and toward the self-ruled island of Taiwan.

NPC spokesperson Lou Qinjian told reporters in Beijing on Monday ahead of the opening that “compared with major military powers, such as the United States, China’s defense spending is quite low, whether as a percentage of GDP or total budget, or in terms of per citizen or per service member expenditure.”

Outside estimates in recent years have suggested higher actual spending than official figures indicate. The official figure does not include a breakdown of military spending, making it difficult to make direct comparisons.

China’s military has also had a tumultuous year.

Multiple high-ranking officials and defense executives were removed from their positions either in the armed forces or political bodies in recent months alongside an anti-corruption drive and apparent purge. Those ousted included then-Defense Minister Li Shangfu, who was removed from his post without explanation.

The fallout has been felt at the NPC.

Last week, Lt. Gen. Li Zhizhong, the deputy commander of the Central Theater Command, was removed as a member of the congress. He formerly served as the head of the equipment department of the People’s Liberation Army (PLA) Ground Force and was the tenth senior PLA officer to have been ousted from the legislative body in recent months.

And since December, four senior figures in the defense industry have been dismissed from the Chinese People’s Political Consultative Conference, the top advisory body to the congress.

This story has been updated with additional information.

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