At the opening session of the National People's Congress (NPC) in the Great Hall of the People in Beijing on March 5, Chinese Premier Li Keqiang announced a GDP growth target of around 5.5% for 2022, the lowest since 1991, but still at the upper end of the market forecast. However, Premier Li also warned of increasing headwinds, but without mentioning the market disturbances sparked by Russia’s invasion of Ukraine. Li said China had enough experience to address major risks and retained market potential, but great efforts would still be required to achieve the target. The latest report also emphasized Beijing’s aim that “the normal order of work and life must be ensured” as the Covid-19 pandemic drags on, with more targeted disease control, the South China Morning Post reports. This year’s GDP target is lower than the “above 6%” goal for 2021, surpassed by actual growth last year of 8.1%.
“The approach for achieving the growth rate target is clear,” Li said, with authorities expected to push infrastructure investment, ease restrictions on regional housing markets, and fine-tune Covid-19 policies to boost consumption demand. A growth rate of 5.5% would still be a substantial gain on the USD17.7 trillion GDP total reached last year. The Chinese economy saw a net increase of USD3 trillion in 2021. Addressing NPC Deputies, Li said it was a “medium-high” GDP target, and was made keeping in mind the need to ensure economic and social stability. Policymakers have also signaled more fiscal spending, tax cuts and readiness to expand their toolbox to support growth this year. Li also underscored the need for risk control in the financial sector, including strengthening risk alerts and setting up a financial stability fund to fend off systemic risks.
Premier Li didn't mention the potential impact of the Ukraine crisis on the Chinese economy, but Scott Kennedy, China Analyst with the Center for Strategic and International Studies (CSIS) in Washington said that although the potential short-term risks were all manageable, the longer the time horizon, the greater the dangers to China’s economy and its international influence. “The real danger here is whether China would risk becoming the target of Western secondary sanctions in order to maintain its support for Moscow,” Kennedy wrote in a note. Zhang Zhiwei, Chief Economist at Pinpoint Management, said China might struggle to achieve its 2022 aim. “It will be a challenging year for the government to achieve this growth target,” Zhang wrote. “The housing sector is slowing down, and the Covid pandemic has constrained the service sector severely. It is not clear how much infrastructure investment can grow in 2022 to offset such adverse effects from housing and Covid.” Chairman He Lifeng of the National Development and Reform Commission (NDRC), said that “China’s economic development has strong stamina and great resilience, and market entities are full of vigor and the ability to resist risks is strong, that is where our confidence in achieving the target of 5.5% economic growth lies”. Maintaining job security was second on the list of top priorities, after stable macro-economic performance. The aim is to create over 11 million new urban jobs, as over 10 million students are due to graduate from college this year. The urban unemployment rate would be kept under 5.5%.
Premier Li said the world economic recovery was still shaky, commodity prices were high and prone to fluctuations, and China’s external environment was “increasingly volatile, grave and uncertain”. China is under the “triple pressures” of shrinking demand, disrupted supply and weakening expectations.
China will extend tax and fee reductions to support manufacturing, smaller businesses and self-employed individuals, with tax refunds and cuts expected to reach CNY2.5 trillion this year. The tax rebate for R&D spending by small and medium-sized enterprises (SMEs) will be raised from 75% to 100%. “This is equivalent to large-scale financial support from the state for enterprise innovation,” Li said. Local governments should do their best to create jobs, improve risk controls, and guard against a systemic financial crisis, according to the government work report.
China’s defense budget will increase by 7.1% to CNY1.45 trillion to “deepen comprehensive combat readiness”. China has maintained single-digit growth in its annual defense budget since 2016. Last year the defense budget grew by 6.8%. Premier Li reaffirmed Beijing’s commitment to the Greater Bay Area initiative, a project to turn Hong Kong and Macao, alongside nine other southern Chinese cities, into an innovation hub. He said China would stabilize foreign trade, make greater use of foreign investment and promote “high-quality cooperation” under the Belt and Road Initiative. “The vast, open Chinese market is sure to provide even greater business opportunities for foreign enterprises in China,” he pledged.
China aims for a 2022 consumer price index of “around 3%”. Last year’s consumer inflation was 0.9%. The fiscal deficit is set at “around 2.8%” of gross domestic product (GDP). The reform of scientific research institutes will be advanced and the establishment and management of major science and technology projects will be improved. Unlike last year, this year’s report doesn't mention the “China-EU Comprehensive Agreement on Investment” or “China-U.S. business relations”. Li mentioned that China will “take well-ordered steps” to achieve peak carbon emissions and carbon neutrality. Beijing will “work harder” to make coal use cleaner and more efficient, but also reduce the use of coal. The country’s progress in cutting carbon dioxide emissions per unit of GDP last year met the requirements listed in the 14th Five Year Plan (2021-25), with PM2.5 density down 9.1% year-on-year and the share of days with good air quality rising to 87.5%.
CPPCC Chairman Wang Yang said in his report that “today’s world is experiencing rapid changes unseen in a century, and China is undergoing the greatest and most unique process of innovation in practice that has ever occurred in human history”. At the same time, the country faces unprecedented heavy tasks in promoting reform, development and stability, and it faces a great number of difficulties, risks and challenges, as well as tough tests in national governance which make it imperative to strengthen the unity of all the Chinese people, he said.
The National People's Congress (NPC) is China's legislature and the National Committee of the Chinese People's Political Consultative Conference (CPPCC) is China's top advisory body. This year, the NPC session has been shortened to six and a half days from the usual 10 days.
This overview is based on reports by the Guardian, China Daily, Global Times and South China Morning Post.
