Delegates applaud as Chinese President Xi Jinping, left, arrives for the opening session of China's National People's Congress (NPC) at the Great Hall of the People in Beijing, Sunday, March 5, 2023. - AP
BEIJING, March 5 (Bloomberg): China’s economic growth target for 2023 is a conservative goal that suggests the government is wary of challenges that may weigh on the economy and wants to account for risks to a recovery that is steadily building momentum.
That’s according to economists who weighed in after Sunday’s announcement that Beijing will target gross domestic product expansion of around 5% for the year.
The goal is somewhat more muted than expectations among economists that China would set a growth target that was higher than 5%. It’s also below the median estimate for an expansion of 5.3% this year, according to economists surveyed by Bloomberg.
Here’s what economists are saying about China’s growth target and what it says about policy this year:
Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd.
"The number is on the conservative side,” Zhang said, adding that he would "take it as a lower bound.”
"In other words, economic growth is likely to be higher than 5% and close to 6%,” Zhang added.
"Because the Covid policy has been adjusted, there’s no urgency for them to run another round of big economic stimulus to boost the economy as the economic recovery is already on track,” he said. "The key message here is that the fiscal policy is going to be more or less stable, not a big stimulus compared to last year.”
Zhou Hao, chief economist at Guotai Junan International Holdings
"While the official growth target has been lowered for the second consecutive year, which might be a disappointment to the market, we reckon investors to pay attention to the underlying growth momentum to gauge the recovery pace in the world’s second largest economy,” Zhou said.
Some investors may see the 5% target as reflecting a "pragmatic approach,” given the economy grew just 3% last year and fell far short of the 2022 growth target of 5.5%, Zhou said.
Despite being a "notch lower” than last year’s goal, the new one "suggests that the Chinese authorities want to restore the credibility of the growth target.”
Other investors may see the goal as looking "very attainable,” Zhou said, adding the "seemingly unambitious growth target suggests that the authorities see the downside risks clearly existing for the Chinese economy.”
The urban job creation target of 12 million for 2023 - up from over 11 million last year - "clearly illustrates the government pays more attention to growth quality,” he said. A higher target for this year "means that the Chinese authorities see the importance of consumption, which will help unleash long-term growth potential.”
Bruce Pang, chief economist for Greater China at Jones Lang Lasalle Inc.
This year’s target is "pragmatic” as it "leaves room for the multiple risks and uncertainties economic growth may face going forward,” Pang said.
Given the economy’s momentum so far and the effectiveness of policies used so far, the target "is highly likely to be achieved,” he added.
Pang, though, said the target "doesn’t necessarily mean fiscal stimulus won’t be beefed up.” He cited the higher deficit ratio goal - Beijing is targeting a fiscal deficit of 3% as a percentage of GDP, compared to last year’s goal of 2.8% - in part as suggesting that fiscal policy may be further strengthened.
Iris Pang, chief economist for Greater China at ING Groep NV
The "relatively conservative” target "might reflect concerns over external growth,” Pang said, adding that trading partners such as the US and Europe "may all become quite weak in the second half of this year.”
She also said the 3.8 trillion yuan ($550 billion) quota for special local bonds - used mainly to finance infrastructure projects - "is a bit low.”
"This may mean that infrastructure growth won’t be very fast,” she said. "If infrastructure growth turns out to be slow, it might impact industries like steel and cement in other countries as well because China may import less commodities.”
Louis Kuijs, Asia Pacific chief economist at S&P Global Ratings
"This kind of target makes sense to me,” Kuijs said. "It gives the message that growth is important but we also have other objectives such as developmental and financial stability considerations, and don’t want to just jack up growth for its own sake.”
Kuijs said he thinks fiscal policy this year will be "relatively constructive” and "growth-supportive.”
"Fiscal policy is set at the beginning of the year - there’s room to tinker with that later on, but a lot of that is said now,” he said, adding that monetary policy may shift later in the year depending on issues like inflation or rapid credit growth.
Wei Yao, head of research for APAC and chief economist for APAC and China at Societe Generale SA
The GDP target "continued China’s tradition of setting a rather conservative goal - it prefers to beat the target rather than missing it,” she said, adding that "the effectiveness of fiscal policy will definitely be stronger than last year even if the actual deficit narrows. That’s because a lot of money was spent in Covid controls, but this year it’s all going to be put into boosting the economy.”
Jacqueline Rong, deputy chief China economist at BNP Paribas SA
China’s contribution to global growth this year will increase sharply as expansion in the US and Europe is set to weaken, Rong said. "However, the positive spillover effect, compared with China’s rebound cycles in the past, will somewhat decline.”
"That’s because this round of recovery will be driven by domestic consumption, particularly that in the service sector,” she added - unlike in prior cycles when rebounds were led by exports or investment. Now, the commodity-intensive sectors of property, exports and cars are all facing short-term headwinds, she said. - Bloomberg
