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Chinese President Xi Jinping and Premier Li Qiang arrive for the opening session of the National People's Congress in Beijing, Tuesday, March 5, 2024.Ng Han Guan/The Associated Press

China’s economy is on the rebound, with the government aiming for 5-per-cent growth and a debt-to-GDP ratio of 3 per cent this year, Premier Li Qiang said Tuesday at the opening of the National People’s Congress in Beijing.

That goal – modest by past Chinese performance, ambitious given the scale of the challenges currently facing the country’s economy – is a repeat of last year’s agenda. Official statistics show China’s GDP grew 5.2 per cent in 2023, but that figure has been greeted with considerable skepticism by outside observers, who point to discrepancies between monthly data and final tallies.

The 2023 goal was also set against an economy that in the previous year was still being dragged down by stringent pandemic measures. No such rebound will be possible this year.

Mr. Li acknowledged that it will “not be easy … to realize these targets,” adding that the central government needs “policy support and joint efforts from all fronts.”

“We should not lose sight of worst-case scenarios and should be well prepared for all risks and challenges,” he said.

A recovery that has sputtered since the lifting of pandemic measures has laid bare China’s deep structural imbalances, from weak household consumption to increasingly lower returns on investment, prompting calls for a new growth model. China started the year with a stock market rout and deflation at levels unseen since the global financial crisis of 2008-09. The real estate crisis and local government debt woes have persisted, increasing pressure on China’s leaders to respond.

Some economists have drawn comparisons with Japan’s lost decades of stagnation, beginning in the 1990s, and have called for pro-market reforms and measures to boost consumer incomes.

One way to improve household consumption and expand China’s domestic market would be through a major stimulus, but President Xi Jinping is opposed to handouts, which he believes make people lazy. Analysts say Beijing also doesn’t trust consumers to spend wisely, fearing they will pump more money into a property bubble that policy makers are trying to deflate.

“Father knows best and father will decide where the money will go,” said Jacob Gunter, a lead economic analyst at the Berlin-based Mercator Institute for China Studies. “Consumers are not going to follow the strategic goals Beijing set out.”

These include refocusing on technological innovation and advanced manufacturing, in line with Mr. Xi’s push for “new productive forces,” Mr. Li said Tuesday. Beijing will also formulate plans for emerging industries such as quantum computing, big data and artificial intelligence.

“We will move faster to boost self-reliance and strength in science and technology,” Mr. Li said. “We will fully leverage the strengths of the new system for mobilizing resources nationwide to raise China’s capacity for innovation across the board.”

Michael Pettis, a Beijing-based senior fellow at the Carnegie Endowment, said Mr. Li’s speech contained no surprises, “but there were also no meaningful solutions.”

The consensus “in favour of distributing fiscal proceeds directly to households is overwhelming,” he wrote Tuesday, and without such a stimulus Beijing will have to take on debt far above its 3-per-cent target or accept slower growth.

Also announced Tuesday was a defence budget increase of 7.2 per cent, a figure closely watched by the United States and China’s neighbours, who are wary about its strategic intentions in the South China Sea, particularly with regard to Taiwan, which China claims as part of its territory.

China’s defence budget has doubled since Mr. Xi came to power more than a decade ago. This year’s increase is the 30th in a row, according to the International Institute for Strategic Studies.

Coming weeks after Taiwan elected the pro-sovereignty Democratic Progressive Party to a historic third presidential term, Mr. Li’s speech appeared to send a message to Taipei, dropping previous promises to seek “peaceful reunification” with the self-ruled island.

Tensions have risen in the past month after a deadly collision between a Chinese fishing vessel and the Taiwanese coast guard off the island of Kinmen, the closest Taiwanese territory to China. Analysts have predicted Beijing may stage major war games when Taiwan’s president-elect, Lai Ching-te, is inaugurated in May, though most observers agree China is nowhere near ready to launch a full invasion of Taiwan.

With reports from Reuters

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