China has set an official economic growth target of “around 5 per cent” for 2023, as it seeks to revive the world’s second-largest economy after a year of tepid growth because of pandemic measures.
It will also expand its defence budget 7.2 per cent, marking a slight increase over growth the previous year.
Both figures for the coming year were released at the opening of the annual gathering of the National People’s Congress (NPC), the country’s rubber-stamp legislature, which draws nearly 3000 delegates to Beijing for the next eight days.
“China’s economy is staging a steady recovery and demonstrating vast potential and momentum for further growth,” outgoing Premier Li Keqiang told delegates while delivering a government work report at the opening of the congress on Sunday.
The economy added more than 12 million urban jobs last year, with the urban unemployment rate falling to 5.5 per cent, according to the work report, which emphasised China’s focus on ensuring stable growth, employment and prices amid global inflation and set the GDP target.
China also unveiled its annual military budget for 2023, which will increase 7.2 per cent to roughly 1.55 trillion yuan ($330 billion) in a draft budget report released on Sunday morning.
The spending increase marks the second year in a row that the annual hike in military spending has exceeded 7 per cent and tops last year’s 7.1 per cent growth, amid rising geopolitical tensions and a regional arms race. As with other recent years, the figure stays well below the symbolically significant double-digit expansion.
“The armed forces should intensify military training and preparedness across the board, develop new military strategic guidance, devote greater energy to training under combat conditions and make well-coordinated efforts to strengthen military work in all directions and domains,” Li’s work report said.
The GDP target and military spending are among the most closely watched in the opening day proceedings, with the GDP target figure in particular being monitored this year as China emerges from its economically draining zero-COVID policy. The new figure appears modest against what some analysts had predicted could be a more robust aim for the year ahead.
The NPC meeting is a key yearly political event that occurs alongside a gathering of China’s top political advisory body, with the events together known as the Two Sessions.
This is the first Two Sessions since Chinese leader Xi Jinping secured a norm-breaking third term atop the Chinese Communist Party hierarchy in October. Xi is set to enter his third term as president, a largely ceremonial title, during the congress.
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China’s GDP expanded by just 3 per cent in 2022, widely missing the official target of “around 5.5 per cent” mainly due to prolonged COVID restrictions. It was the second lowest annual growth rate since 1976, behind only 2020 — when the initial COVID outbreaks nearly paralysed the economy.
In December, after the Communist Party abruptly ended its zero-COVID policy, a massive wave of infections swept across the country, throwing supply chains and factories into chaos. But the disruptions started to fade away in January, and the economic recovery picked up pace last month.
Official data released Wednesday showed China’s factories had their best month in nearly 11 years in February, underscoring how quickly economic activity has bounced back following the end of the COVID exit wave. The services and construction industries also had their best performance in two years.
Moody’s Investors Service has since raised its China growth forecast to 5 per cent for both 2023 and 2024, up from 4 per cent previously, citing a stronger than expected rebound in the short term.
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Analysts had predicted a difficult track to recovery for China amid global headwinds, which may have also been reflected in the conservative 2023 target of “around 5 per cent” announced Sunday.
The global economy will weaken further this year as rising interest rates and Russia’s war in Ukraine continue to weigh on activity, the International Monetary Fund estimated in January. Global growth will likely slow from 3.4 per cent in 2022 to 2.9 per cent in 2023.
China is set to release its import and export data for the first two months of this year on Tuesday, which will provide a glimpse into demand for global trade.
During the congress, the ruling Communist Party’s new economic team, including various ministers and financial chiefs, will be unveiled with other key appointments — already selected by the Communist Party leadership — also approved. Premier Li’s replacement will be formally appointed during the meeting, which runs until March 13.
The new economic team will face the tough task of reviving the Chinese economy as it navigates a growing array of challenges, including sluggish consumption, rising unemployment, a historic downturn in real estate, and increasing tension with the United States over technology sanctions.
The 7.2 per cent increase in planned defence spending marks the first time in the past decade that the budget growth rate has increased for three consecutive years, as Beijing continues to modernise and build-up its military, while asserting pressure on Taiwan — the self-governing island democracy the Chinese Communist Party claims as its own despite never having ruled.
China now controls the world’s largest navy by size and continues to advance its fleet of nuclear submarines and stealth fighter jets.
The military budget expanded 7.1 per cent to 1.45 trillion yuan ($310 billion) in 2022, compared with 6.8 per cent the previous year. The last year China’s annual defence spending grew by double digits was 2015. The size of this year’s budget is more than double that of 10 years ago.
Chinese officials have repeatedly sought to portray their military spending as reasonable relative to other countries like the United States — part of China’s bid to present itself as a peaceful power, despite its aggression in the region including its militarisation of the South China Sea and heavy patrolling around Taiwan.
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During a press conference Saturday ahead of the opening day, NPC spokesperson Wang Chao said China’s defence budget maintained a “relatively moderate and reasonable growth rate”.
“China’s defence expenditure as a percentage of GDP has remained stable over the years. It remains basically stable, lower than the world average,” Wang said.
