A Chinese flag flies high above the Bund.
Liu Liqun | Corbis documentary | Getty Images
Faced with a higher base effect, even the Chinese government admitted that hitting this year's target “will not be easy” – especially as the world's second-largest economy continues to grapple with a host of problems, from overcapacity and easing price pressures to to a weakening real estate market and debt crisis.
“The 5% GDP target is really ambitious. Even last year, it was the opening year of Covid and China achieved 5.2% (growth), mainly due to the recovery in consumption,” said Wang Dan, chief economist at Hang Seng Bank (China). said CNBC on Tuesday.
“This year we will not reopen and that means it will be very difficult for China to actually reach the 5% unless there is a huge infrastructure project. [target],” She said.
“When it comes to actual spending, the fiscal deficit this year is only 3%. If we think about it, GDP growth will be around 5% – if the government target is met – and that means household spending as a percentage of GDP will actually shrink.”
While the labor report is light on details, it appears to suggest that Beijing is refraining from the aggressive, bazooka-like stimulus measures that some market observers had expected.
“Mostly it is a contractionary fiscal policy rather than an expansionary one, so I think there needs to be a project comparable in size and quality to the Three Gorges Dam to really boost domestic demand,” Wang added added.
The Three Gorges Dam is a hydroelectric project across the Yangtze River that was first approved in the early 1990s but did not become fully operational until 2015.
China has historically resorted to infrastructure development as a short-term solution to boost growth, particularly after the 2008/2009 financial crisis.
Starting this year and “over the next few years,” Beijing said it would issue 1 trillion yuan ($138.9 billion) of “ultra-long” special government bonds in 2024 to finance major projects in line with national strategies.
According to Erica Tan, an economist at, these bonds do not contribute to the budget deficit and have only been issued three times before, namely during the Asian financial crisis in 1998, to capitalize the China Investment Corporation in 2007 and during the Covid-19 crisis in 2020 Maybank.
Economists at Goldman Sachs said that promise was the “key positive surprise” from this year's government jobs report.
Premier Li Qiang also said 3.9 trillion yuan worth of dedicated local government bonds will also be issued this year, 100 billion yuan more than last year.
China's real estate problems are closely linked to the finances of local governments, as they have historically relied on land sales to developers for a significant portion of their revenue.
The real estate market slumped after Beijing cracked down on developers' heavy reliance on debt for growth in 2020 – driving some of its biggest real estate companies into bankruptcy and weighing on consumer confidence and overall economic growth.
“So far, the real estate market is still contracting and the hope of a real estate market recovery has all but disappeared, leaving us with only production and infrastructure,” said Wang of Hang Seng Bank (China).
Infrastructure development is at the heart of one of the government's ten key work tasks in this year's work report, which commits to promoting integrated development between rural and urban areas.
China's ultimate goal is a promise to “modernize the industrial system and develop new high-quality productive forces more quickly” – underscoring the strong emphasis on strengthening Beijing's industrial capability as a longer-term growth engine.
“We should give full play to the leading role of innovation, advance industrial innovation through innovation in science and technology, and push forward the new industrialization to increase total factor productivity, steadily promote new growth drivers and strengths, and promote a new leap forward in the productive forces,” Premier Li said, according to an official translation in the work report.
Chinese Premier Li Qiang delivers a speech during the opening of the second session of the 14th National People's Congress at the Great Hall of the People on March 5, 2024 in Beijing, China.
Lintao Zhang | Getty Images News | Getty Images
Specific industries mentioned include artificial intelligence, new energy vehicles, hydrogen propulsion, biomanufacturing, commercial space travel, new materials and innovative medicines.
“Our aggressive focus on achieving industrial performance shows that leadership will continue to pour credit and other resources into expanding advanced manufacturing capabilities,” Maybank's Tan said.
“While this is driven by their desire for economic security, this move will be closely watched by countries wary of export competition from cheaper Chinese products.”