Beijing was in full political turmoil on Tuesday. China’s annual legislative meeting – the National People’s Congress, where Communist Party leaders promote their solutions to national ills – has opened.
The event is an opportunity for leaders to signal the direction of the economy and indicate how and where the government will spend money in the coming year.
Yet even though they aimed high, they didn’t offer much. Officials indicated they were not prepared to stand in the way of efforts to revive an economy hit by a housing crisis, declining consumer confidence and financial pressures from debt-laden local governments. Despite their reluctance to spend, China’s top leaders have said the economy will grow about 5% this year.
The growth target and other policies were outlined in a report delivered to the annual session of the legislature. It was delivered by China’s number two, Li Qiang, and is the highlight of a week-long gathering dominated by officials and party loyalists.
Everyone agrees: the objective is ambitious.
There was one word that economists universally used to describe China’s 5% growth target: ambitious.
In the past, this would not have been the case. For decades, China’s economy has been synonymous with much higher growth, sometimes even double digits. But three years of strict measures linked to the pandemic have had harmful consequences, as well as a real estate crisis which worsened and led to the bankruptcy of dozens of developers. With China’s leaders out of action, some experts are now skeptical that China can achieve 5% growth this year.
“Unsurprisingly, this is an unrealistic set of goals,” said Logan Wright, director of China market research at Rhodium Group, a company specializing in China research.
It’s still possible that the housing crisis will ease this year, Mr. Wright said, “but policy measures as outlined here won’t have much to do with that.”
Wait, not “bazooka”?
Some thought – or hoped, at least – that Tuesday’s reports would indicate that China was ready to take bigger steps to revive the economy, such as bailing out local governments, bailing out real estate companies that are failing. are not collapsed or by offering assistance to households. to stimulate spending.
Instead, the government said it would make a similar amount available as last year in special bonds for local governments. He did not propose any new measures for the real estate market and only spoke of the need to increase consumer confidence.
“They could have done more and the support could have been greater,” said Tao Wang, chief China economist at UBS. “They need explicit and greater support from central government,” she said.
Economists are not the only ones to be disappointed. Investors who were hoping China would deploy the heavy artillery were also disappointed. In Hong Kong, where foreign investors can bet on China’s biggest companies, the Hang Seng index fell 2.6 percent.
“Anyone looking for the political bazooka will be disappointed,” said Andrew Polk, co-founder of Trivium China, a research and consulting firm. “But,” he added, “the die was cast some time ago.”
In military matters, there is money to spend.
China’s top leaders have outlined plans to increase military spending by 7.2% in 2024, to around $231 billion. The percentage increase was the same as last year and continued a decades-long expansion in China’s military spending, now second in the world after that of the United States.
China’s spending on warships, fighter jets and other weapons is aimed primarily at projecting its power in Asia, including strengthening the country’s grip on the disputed South China Sea and threatening island democracy Taiwan autonomous that Beijing considers its territory.
In his report to Parliament, Li reiterated China’s long-standing warning against “separatist activities aimed at ‘Taiwan independence'”, adding that Beijing would “show firmness in promoting the cause of the reunification of China.
Mr. Li’s vague comments reflect the fact that Chinese leaders are waiting for Taiwan’s president-elect, Lai Ching-te, to take office in May before considering significant steps, which could include more military operations around the island, said Ou Si-fu: a researcher at the National Defense and Security Research Institute, a think tank in Taipei under Taiwan’s Defense Ministry.
But China’s heavy military spending has shown that Xi Jinping would continue to prepare for a potential conflict, if only to show Washington that it was serious about asserting its interests.
“Since relations with the United States are not good, China obviously cannot show too much weakness,” Ou said.
Come join us. Sorry, the press conference is canceled.
China has invited journalists from around the world and issued them visas, which in most cases have become difficult to obtain. For many foreign correspondents, this year’s National People’s Congress was the first time the Chinese government allowed them to enter China to report since the pandemic.
But the party has also radically changed the way it communicates during the congress. On Monday, he said it ended a long-standing tradition: the prime minister’s press conference. It was one of the rare opportunities for journalists to interact with senior officials. The decision to scrap the press conference, announced on the eve of the legislative conclave, was seen by many as yet another departure from transparency.
