China has set a growth target of 5% for 2024 as it vowed to “transform” its growth model and defuse a number of issues that have hit its economy in recent years.
China premier Li Qiang told the National People’s Congress that the domestic economy was facing a number of “challenges”, noting both difficulties in the global economy and reduced demand from Chinese consumers.
“The foundation for the continuous recovery and improvement of our country’s economy is still not solid, with insufficient demand, overcapacity in some industries, weak societal expectations and many lingering risks,” he said.
Two Sessions
Investors are keeping an eye on China’s annual set-piece meetings, the National People’s Congress and the Chinese People’s Political Consultative Conference, for signs of what President Xi Jinping is planning for the world’s second largest economy. These are known as the ‘Two Sessions’.
China has been facing issues such as deflation and a slump in its property and building market over the last year, as it struggles to emerge from the Covid-19 pandemic, which stymied economic growth.
Li acknowledged the “risks and potential dangers in real estate, local government debt and small and medium financial institutions were acute in some areas," in his speech to the national congress, which is seen by many as a ‘rubber stamp’ body.
Last month, property giant Evergrande was ordered into liquidation by a court in Hong Kong over (£236bn) of debt, the latest in a troubled saga for the company which has been facing serious debt issues for the last two years.
China stock rises
The Chinese premier also said that the government would issue 1trn yuan (around £110bn) in "ultralong special treasury bonds" over the coming years as Beijing looks resolve this issue.
In response to the announcement, the Chinese stock market, CSI 300 index, ended 0.7% higher than when it opened. CNBC reports that this is the highest in three months.
Reuters reported that the collapse of Evergrande signalled the downfall of China’s property market and represented a blow to the economy.
More stimulus expected
Jinny Yan, chief China economist at ICBC Standard Bank, told Bloomberg TV to ‘expect more China stimulus said that maintaining a 5% growth is “becoming increasingly difficult”.
Yan pointing to a working document from Beijing that stated its top three priorities are modernising the supply chain, promoting higher quality development, rather than just GDP growth, and a boost to domestic consumption.
She said to expect more stimulus measures in the coming months:
“In the immediate aftermath of the Two Sessions, we will likely also still see more policies being announced and implemented by the various ministries.”
Alongside the policies aimed at boosting the domestic economy, China’s defence spending will be increased by 7.2% this year.