Chinese Premier Li Qiang has announced an ambitious 2024 economic growth target of around 5%, promising steps to transform the country’s development model and defuse risks fuelled by bankrupt property developers and indebted cities.
The move signals Beijing’s prioritization of growth over any reforms, as the base number has become higher. Last year’s uneven growth exposed China’s deep structural imbalances, from weak household consumption to increasingly lower returns on investment, prompting calls for a new growth model.
China started the year with a stock market rout and deflation at levels unseen since the global financial crisis of 2008–09. The property crisis and local government debt woes persisted, increasing pressure on China’s leaders to come up with new economic policies.
Some economists have drawn comparisons with Japan’s lost decades since the 1990s, calling for pro-market reforms and measures to boost consumer incomes. Li acknowledged reaching the target “will not be easy,” adding a “proactive” fiscal stance and “prudent” monetary policy was needed. The International Monetary Fund projects China’s 2024 growth at 4.6%, declining towards 3.5% in 2028.
Chinese stocks (.CSI300), opens new tab, and the yuan were largely unchanged.Budgetary plans included an increase in defence spending by 7.2% this year, similar to 2023, closely watched by the U.S. and China’s neighbours, who are wary about its strategic intentions as tensions rise over Taiwan. China’s defense budget has doubled since President Xi Jinping came to power more than a decade ago.
This year marks the 30th in a row of increasing defence expenditure, based on research by the International Institute for Strategic Studies.China’s state planner vowed to improve policies supporting childbirth, raise benefits and basic pensions for its growing elderly population.
On the property sector, Li vowed to finance “justified” projects and provide more social housing as Beijing looks to resolve a glut of unfinished properties that have worried homebuyers.
While Li said China wanted to curb industrial overcapacity, he also flagged more resources for tech innovation and advanced manufacturing, in line with Xi’s push for “new productive forces.”
China will also lift all foreign investment restrictions in the manufacturing sector and formulate development plans for quantum computing, big data, and artificial intelligence as it strives for technological self-sufficiency.
Some analysts have criticised China’s policy focus on manufacturing, saying it exacerbates industrial overcapacity, deepens deflation, and heightens trade tensions with the West.
(Reuters)
