BEIJING, March 2 (Reuters) – China is getting increasingly ambitious with its 2023 growth target, potentially targeting up to 6%, in a bid to bolster investor and consumer confidence and build on a promising post-pandemic recovery, sources involved in the policy said the talks.
Four of the sources said China was likely aiming for growth of up to 6%, while three others said China was aiming for 5% to 5.5%. They all spoke on condition of anonymity as the discussions were held behind closed doors.
Taken together, these numbers point to growing optimism in Chinese policy circles compared to November, when government advisers recommended more modest targets ranging from 4.5% to 5.5%.
The previous recommendations were made weeks before China lifted the world’s toughest COVID-19 restrictions. Recent data showed that the economy was recovering from its pandemic shock at a better pace than expected.
The final growth target, which may be a range, will be announced on March 5, at the start of China’s annual legislative meeting.
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“The growth target for this year could be 5-6%,” said one of those involved in the talks. “We need to achieve an economic recovery, boost employment and confidence, these are the key factors we need to take into account.”
One of three sources advocating a more modest target warned that “the real estate sector is still down and it is difficult to fill the void as foreign trade risks dragging down economic growth this year.”
None of the seven sources is involved in the final decision-making process.
The government is also expected to unveil more stimulus measures at the National People’s Congress this month, to mitigate the impact of the weak real estate market and lower global demand for its exports, officials said. four of the interviewees.
To spur growth, the government should widen its annual budget deficit to about 3 percent of gross domestic product this year and issue about 4 trillion yuan in special bonds to support investment spending, they said.
The new economic leadership team, expected to be led by former Shanghai Communist Party chief Li Qiang as China’s new premier, is keen to show its ability to deliver better economic growth to create more jobs and ease local government funding constraints, the four said.
China’s economy grew 3% in 2022 from a year earlier, severely missing the official target of around 5.5%, as the COVID-19 pandemic, housing market tensions and the slowdown in global demand have taken their toll. Excluding 2020, when the pandemic started, it was the worst performance since 1976 – the final year of Mao Zedong’s cultural revolution that destroyed the economy for a decade.
It was also the biggest miss of a growth target. Previously, China had only narrowly misfired during the Asian financial crisis in the late 1990s and a currency crisis in 2014-15.
The last time China set a target range was in 2019 at 6-6.5%.
Some economists say China’s ambitious annual growth targets are counterproductive and that policymakers should instead focus on structural reforms to improve the sustainability of any economic expansion.
In the past, lofty goals drove local governments to launch costly infrastructure projects, which contributed significantly to China’s overall indebtedness, which accounts for nearly 300% of economic output.
Three of the sources also said China would stick to the long-standing inflation target of around 3%.
Consumption and services have led China’s recovery year-to-date. Manufacturing activity also grew at the fastest pace in more than a decade in February, an official survey showed on Wednesday, beating expectations.
Iris Pang, chief economist for Greater China at ING, said in a note that this week’s upbeat data gave the government good reason to set a lofty growth target of 5.5% to 6%.
On March 5, outgoing Premier Li Keqiang is due to deliver the 2023 government work report, which includes key economic goals and political priorities.
Li was quoted by state media on Wednesday as saying the government was still amending the work report.
“Growth this year will be over 6%, which is not high given last year’s low base,” Yu Yongding, a leading government economist who previously advised the Bank, told Reuters. popular in China.
Yu said a growth target above 6% would help “boost morale and boost China’s economic growth potential.”
Reporting by Kevin Yao; Editing by Marius Zaharia & Shri Navaratnam
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