China sets modest 5% growth target as it seeks to boost economic recovery

Workers on an automobile assembly line in China earlier this year. The Chinese government set a GDP growth target of around 5% this year. Photo: CFOTO/Future Publishing via Getty Images

China on Sunday set a modest economic growth target of about 5% and elevated domestic consumption as a key policy goal.

The big picture: Battered by a slew of COVID restrictions and an increasingly tightened regulatory environment, China's GDP grew by only 3% last year, one of its lowest in decades.

  • But since the Chinese government abandoned its zero-COVID policy last December, the economy has shown signs of recovery, according to the latest data.
  • China's manufacturing purchasing managers' index, which measures factory activity, hit an 11-year high of 52.6 in February, according to official data. The country's export orders, services and construction activity also expanded significantly last month.

Driving the news: In a government report released on Sunday, China's outgoing Premier Li Keqiang called for creating about 12 million new urban jobs and set a budget deficit target of about 3%.

  • Specifically, he called for increasing incomes for both urban and rural residents and stimulating services consumption, without offering details.
  • He also proposed a further expansion of market access to attract foreign investment. Many large U.S. companies are planning expansions in China in anticipation of an economic rebound there, WSJ reported.

Between the lines: The growth target of around 5% is slightly below the 5.5% target for last year, which the government fell far short of due to stringent COVID restrictions and a real estate crisis.

  • The average economic growth forecast among economists for this year is 5.24%, according to a CNBC analysis.

What they're saying: "The GDP target of around 5% is realistic and indicates that the government will not pursue any large-scale stimulus," said David Dollar, a senior fellow at the Brookings Institution and a leading expert on China's economy.

  • "This year should see a mixed performance of the Chinese economy because there is pent-up demand for consumption after the long stretch of zero-tolerance policies, but there is also a weak external picture as the rest of the world slows down," he told Axios.
  • Wei He, a China economist at research firm Gavekal Dragonomics, wrote in a research note, that the "policy settings suggest the government is happy to rely on the natural dynamics of reopening from COVID restrictions to deliver a recovery, and feels little need to dial up stimulus measures—at least for now."

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