China has set its lowest annual GDP target in decades, as premier Li Keqiang warned of a “grave and uncertain” outlook against the backdrop of the coronavirus, a slowing economy and the war in Ukraine.
Li announced on Saturday the unusually modest target of about 5.5% growth for 2022 – the lowest since 1991 – in an address to about 3,000 members of the National People’s Congress in Beijing’s cavernous Great Hall of the People.
Li said the world’s second-largest economy “will encounter many more risks and challenges, and we must keep pushing to overcome them”. He did not mention the ongoing war in Ukraine and its implications for the global economy.
China’s economy is a key driver of global growth and crucial domestically for the ruling Communist Party. Last year it reported an 8.1% rebound.
Yet the party is deeply concerned over social instability in its huge population should economic growth dip too low. Economic stability must be a “top priority”, Li added.
Ukraine fallout looms large
The annual parliament session is a week of highly choreographed meetings laying out the party’s political priorities, economic expectations and foreign policy goals, and this edition comes in a year in which President Xi Jinping intends to further cement his grip on power.
Prior sessions have announced high-profile legislation such as the controversial national security law imposed on Hong Kong and reversals to the country’s one-child policy, but no flagship laws are expected this year.
The agenda of these meetings was set well in advance, so it is unlikely that there will be much open discussion about ongoing developments elsewhere in the world, said Patricia Thornton, associate professor of Chinese politics at Oxford University.
“But China’s response to those ongoing developments – including, most prominently, Russia’s invasion of Ukraine – will have a profound effect on China’s economic and development goals moving forward, and will no doubt cast a long shadow over the proceedings.”
China’s economic growth has slowed markedly in recent years from its past boom decades when annual expansion sometimes exceeded 10%. In the past 12 months, Beijing was largely successful in controlling the virus and limiting its economic impact.
But the economy has also been hit lately by a cascading property market slump, government regulatory crackdowns on the property, tech and financial sectors, and restrictive containment measures to forestall virus outbreaks that have dampened consumer demand. In recent weeks, experts say, the crisis in Ukraine has added an extra layer of uncertainty to the world’s second-largest economy.
“Looking back on the past year, we can see that our achievements did not come easily. While the economy continued to recover from major shocks including Covid-19, many new changes occurred in and outside China, and the difficulty of keeping the economy running stably mounted,” Li said in his report.
China has so far avoided openly condemning the actions of its diplomatic partner Russia, and Li made no direct reference to the conflict in his report on Saturday. But Thornton said concern over the fallout from the Russian invasion was reflected in Beijing’s projections of the downward pressures on the Chinese economy.
“Putin’s all-out push through Ukraine, and the response of China’s major trading partners to that, places Beijing in the difficult position of having to examine its priorities very carefully in light of the anticipated economic and diplomatic impact of its choices moving forward,” she said.
China’s economy last year handily exceeded the official target of at least 6% growth, expanding by 8.1%, but the pace slowed significantly in the second half.
Li pledged to support growth through tax relief and measures to keep real estate prices and markets stable.
‘Stability, stability, stability’
The government also announced on Saturday that China’s military budget – the second largest in the world after the US – will increase by 7.1 % this year to 1.45tn yuan ($230bn), a rate in line with recent years.
China has invested heavily in a world-class force rivalling that of the US and other western powers. “While economic development provides a foundation for a possible defence budget increase, the security threats China is facing and the demands for national defence capability enhancement caused by those threats are the driving factors,” wrote the state-owned Global Times newspaper this week, predicting such an increase.
For a third year running, the legislative forum is taking place on a smaller scale due to Covid.
Policymakers are expected to discuss strategies for boosting births, with fears of a demographic crisis sparked when the birthrate plummeted to a record low last year. Li said China would improve support for parents having children.
The legislative session is the lesser of two political events this year, as the Communist party gears up for its 20th congress. The pivotal autumn gathering, held every five years, is expected to easily secure Xi a third term after he changed the constitution to remove term limits.
“The mantra in 2022 will be ‘Stability, stability, stability’” in the run-up to the autumn party meeting, said Yuen Yuen Ang, author of China’s Gilded Age.
A key resolution passed last year was designed to help Xi strengthen his grip by setting in stone his vision for China. “President Xi is on a mission to redefine the meaning of development in China and also the basis for the Party’s legitimacy,” she added. (The Guardian)