Do your best to avoid excessive growth retardation. Chinese Premier Li Keqiang has made stability a “top priority” for 2022 as risks to China’s economy rise. In front of about 3,000 deputies who gathered this Saturday for the opening of the parliamentary session, the head of government set a growth goal for this year of “about 5.5%” against “at least 6%” planned for 2021, China did not set. GDP target below 6% since 1991.
Beijing takes note of the slowdown in the Chinese economy. But 2022 promises to be a particularly challenging year. “Achieving this growth target will require strenuous efforts,” the prime minister said, noting that “the risks and challenges facing China this year have increased significantly.”
Geopolitical Tensions
In the solemn fence of the People’s Palace, given away during the great renewal of government expected in the fall, a particularly gloomy picture was drawn: “Covid-19 has not ended; the global economic recovery is fizzling out; the price of the main types of raw materials fluctuates at a high level; the external environment remains uncertain and tends to become more complex and unsettling. »
After a quick export-driven recovery from the pandemic, the world’s second-largest economy began to weaken since last summer, facing a sharp housing market downturn, recurring Covid-19 outbreaks and weak consumer spending. Growth fell from 18.3% in the first quarter of 2021 to 4% in the last quarter. The outlook has worsened this year as geopolitical tensions escalate over Russia’s invasion of Ukraine.
“The resurgence of consumption and investment is fading; maintaining exports is becoming increasingly difficult; supply of energy raw materials remains tight; SMEs, micro-enterprises and individual entrepreneurs face difficulties in their activities; the task of stabilizing employment promises to be more difficult,” Li Keqiang further pointed out.
Decisive year
Faced with these many challenges, the priority is to “stabilize” growth, the prime minister insisted, using the term… 28 times! Maintaining growth is especially important this year as leader Xi Jinping intends to remain party chief for a third term at the 20th party congress in the fall.
China has promised “more focused and sustained” stimulus, “intensified implementation” of monetary policy (assuming the central bank continues to cut interest rates), and “stabilized prices” of land and homes. Beijing has set itself the goal of creating about 11 million jobs this year, the same number as last year, and limiting inflation to 3%.
Significant increase in the military budget
On Saturday, China announced an increase in its military spending in the context of global tensions caused by Russia’s invasion of Ukraine, its designs on Taiwan and conflicts with the inhabitants of the South China Sea. The military budget this year will increase by 7.1% compared to last year (+6.8%).
This is the strongest growth since 2019 (+7.5%). First of all, the growth of Chinese military spending clearly exceeds the expected GDP growth set by the Prime Minister at 5.5% for the current year.