Mar 6, 2023 - World

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

Workers at an automobile assembly line in China

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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