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PoliticsChina

China commits to 5% growth target despite shaky economy

March 6, 2024

As China struggles with multiple economic challenges, Premier Li Qiang told the National People's Congress that Beijing will aim to keep growth at around 5% per year. But many analysts warn this might be too ambitous.

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A worker in China checks stacks of coolant radiators
China's manufacturing sectors has been declining for the last five monthsImage: Chinatopix/AP Photo/picture alliance

The head of China's state planning body, Zheng Shanjie, told the press on Wednesday that the country’s economic  growth target of 5% is achievable. This comes a day after Premier Li Qiang announced the country's growth goal at the National People's Congress (NPC), China’s highest legislative body.

Over 3,000 lawmakers are meeting in Beijing this week for their biggest political event of the year.

China's annual parliament session starts this week

State acknowledges challenges

China's top state planner Zheng was speaking at a briefing on the sidelines of the NPC.

He said the goal is "supporting scientific and technological innovation, integrated development of urban and rural regions, food security and energy security, among other areas."

The Chinese official acknowledged there are obstacles to reaching this goal, including a long investment cycle..

"It's hard to fully meet needs using existing funding channels and there's an urgent need to increase support," he added.

Overall, he still expected the world's second-largest economy to have a good first quarter. An official survey released on Friday indicated modest signs of improvement in China's service sector, but also showed a decline in manufacturing for the fifth consecutive month in February.

Analysts say the goal is ambitious

China's economy surpassed the 5% threshold last year, expanding by 5.2% in total. The economic growth largely depended on credit-driven and state-led investments. However, the country is now facing deflation, a sharp decline in the stock market as well as a property crisis.

While Chinese politicians project optimism about its current growth goal, analysts are skeptical.

"The growth target is quite challenging, and implies a high level of public investment," Tianchen Xu econimist at the economist intelligence Unit in Bejing, told Reuters.

Separately, Mark Williams, chief Asia Economist at London-based Capital Economics consulting firm, pointed to the troubles surrounding China's real estate market in the wake of the Evergrande legal troubles.

"The drag from the unavoidable structural decline in China's property sector has only just begun," Williams said in a note to clients, warning that weak demand in the construction sector "would shave another percentage point off China's average economic growth
rate over the rest of this decade."

Economy casts shadow over China's annual National People's Congress

as/dj (Reuters,AP)