China’s Premier Li Qiang announces an ambitious growth target of around 5% during the annual parliamentary session

China’s Premier Li Qiang has unveiled an ambitious growth target of approximately 5 per cent during the annual parliamentary session, aiming to instill confidence in the world’s second-largest economy.

Nevertheless, analysts have expressed concerns about the absence of detailed strategies to realize this objective, considering the nation’s entrenched challenges.

Lack of Concrete Measures Raises Concerns

As per a Bloomberg report, although Premier Li acknowledged the necessity for support on “all fronts,” the report lacked concrete plans.

The fiscal deficit remained unchanged, major initiatives to stimulate consumption were sidestepped, and specifics regarding addressing the real estate crisis were scant.

This has prompted experts like Alicia Garcia Herrero, Natixis SA’s chief Asia-Pacific economist, to critique the absence of a clear roadmap.

Alicia Garcia Herrero voiced her apprehension, stating, “This is a target without a plan.”

She underscored the seriousness of the situation, citing issues such as declining wages and deflation, and questioned the government’s approach to tackling these challenges.

Economic Slowdown and Policy Shifts

China’s economic growth has been decelerating for over a decade, with the average growth rate hovering barely above 4 per cent in recent years.

President Xi Jinping’s emphasis on technological self-reliance and national security has reshuffled priorities, rendering significant stimulus measures off-limits to mitigate debt risks.

According to Li Daokui, a professor at Tsinghua University, while initiatives like urban district renovations are crucial, more assertive policies are needed to stimulate consumption.

He urged the government to concentrate on measures directly encouraging spending, underscoring the significance of consumer-driven growth.

Uncertainty Looms Over Policy Direction

The pivot towards promoting “new productive forces” has raised apprehensions about a supply-side orientation, potentially exacerbating deflationary pressures and trade tensions.

Ambiguities in policy direction have left experts pondering the government’s approach and its implications for economic stability.

Jing Liu, chief China economist at HSBC Holdings Plc, underscored the urgent necessity for additional housing support measures amid concerns regarding the real estate sector.

However, uncertainties persist regarding the government’s stance and forthcoming policy decisions.