What is going on in the world? Asian leaders have warned about the haphazard reopening and the consequences for the global economy
Kristalina Georgieva, the chief of the International Monetary Fund, has warned that this year will be more difficult than the last one for the global economy.
“We expect one third of the world economy to be in recession,” she said, adding that even for countries that are not in recession: “It would feel like recession for hundreds of millions of people.”
China is likely to be at or below global growth in the next few years for the first time in 40 years. “Before Covid, China would deliver 34, 35, 40% of global growth. It is not doing it anymore,” she said, adding that it is “quite a stressful” period for Asian economies.
Official statistics show that the economy grew just 3% last year — among the slowest rates since market reforms began after Chairman Mao Zedong died in the late 1970s — although some economists suspect the growth rate may actually have been lower.
All of the Asian leaders begin with the question, “What is going to happen with China?” Is China going to return to a higher level of growth? she said.
China’s haphazard reopening has unleashed a wave of Covid cases that have overwhelmed the health care system, dampening consumption and production in the process.
The Next-Year National People’s Congress (NPC) Meeting: China’s First Receipt, Growth, and Economic Progress
The opening of the National People’s Congress (NPC), the country’s rubber-stamp parliament, has two figures released for the coming year.
At the opening of the congress on Sunday, outgoing premier Li Kehui told delegates that China was staging a steady recovery and had great potential.
The Chinese economy added over 12 million urban jobs last year, with the unemployment rate falling to 5.5%, as the work report emphasized the country’s focus on maintaining stable growth, employment and prices.
The military budget expanded 7.1% to 1.45 trillion yuan in 2022, compared with 6.8% the previous year. China spent more money on defense in the last year than in the previous year. The size of this year’s budget is more than double that of ten years ago.
The military spending increase has topped last year’s growth and is the second year in a row that it has done so. The figure stays below the double-digit expansion that has happened in previous years.
“The armed forces should intensify military training and preparedness across the board, develop new military strategic guidance, devote greater energy to training under combat conditions and make well-coordinated efforts to strengthen military work in all directions and domains,” Li’s work report said.
In the opening day proceedings, the GDP target is one of the most watched because of its importance as China emerges from its economic draining zero- COvid policy. The new figure appears modest against what some analysts had predicted could be a more robust aim for the year ahead.
The NPC meeting is a key yearly political event that occurs alongside a gathering of China’s top political advisory body, with the events together known as the Two Sessions.
Since October of last year, there have been two sessions, one of which was the third term for leader of the Chinese Communist Party. Xi is set to enter his third term as President, a largely ceremonial title, during the congress.
Official data released Wednesday showed China’s factories had their best month in nearly 11 years in February, underscoring how quickly economic activity has bounced back following the end of the Covid exit wave. The construction industry had their best performance in two years.
Moody’s Investors Service has since raised its China growth forecast to 5% for both 2023 and 2024, up from 4% previously, citing a stronger than expected rebound in the short term.
The recovery for China may have been difficult due to global headwinds, which may have been reflected in the conservative target of around 5% announced Sunday.
The global economy will weaken further this year as rising interest rates and Russia’s war in Ukraine continue to weigh on activity, the International Monetary Fund estimated in January. Global growth will likely slow from 3.4% in 2022 to 2.9% in 2023.
The Presidential Meeting on China’s Redevelopment and Implications for Economic Policy Making: An Overview of the Year’s Progress and Future Directions
China is set to release its import and export data for the first two months of this year on Tuesday, which will provide a glimpse into demand for global trade.
A group of Western educated officials who have influenced economic policy making over the past 10 years will be leaving along with Li. The tough task of reviving the economy will be addressed by the new team.
The economic team will be faced with a lot of challenges, including sluggish consumption, rising unemployment, a historic downturn in real estate, and increasing tension with the United States over technology sanctions.
“China’s defense expenditure as a percentage of GDP has remained stable over the years. It remains basically stable, lower than the world average,” Wang said.
The goal is slightly lower than one year ago, when it was set at 5.5%, due to the Omicron variant of COVID-19 starting to challenge the government’s “zero COVID” policy.
“This year, it is essential to prioritize economic stability and pursue progress while ensuring stability. The country’s parliament, the National People’s Congress, opened this year’s meeting with a speech by Li, saying that policies should be targeted and kept consistent.
The meetings, involving about 3,000 delegates from across the country, are a chance to review the year’s achievements and preview upcoming legislative proposals, though delegates rarely cast dissenting votes.
Semantics of the economy in China: Wang Chao’s address to the National People’s Congress on Sunday (Thursday)
China’s parliamentary spokesperson Wang Chao told reporters this weekend that the budget increase this year was quote “relatively moderate and reasonable” and a response to the “complex security challenges” in the world.”
Li also re-hashed old language on Taiwan, suggesting that China’s attitude towards the self-governed island has not changed, with Beijing preferring to “re-unify” with the island peacefully rather than by use of force.
“We must persist in implementing the Party’s overall strategy for resolving the Taiwan issue,” he said. The two sides of the strait need to work together to promote economic and cultural exchanges.
For the most part, Li’s speech — a kind of “state of the union” delivered to the National People’s Congress — focused heavily on the economy, an area of policy that he has nominally been in charge of since 2013.
He said the government should deepen reform and opening and boost market confidence, something that has been hurt by harsh “zero COVID” policies, as well as crackdowns in recent years that have hurt tech, education, real estate and other sectors of the economy.
Li will be stepping down during the congress as part of the biggest shake up to the country’s economic leadership in a decade.
According to many, Li Qiang is expected to get the job in an attempt to consolidate his grip on power as he heads into a rare third term as state president. The two of them are not related.
In his speech on Sunday, Li Keqiang repeated calls for the government to prioritize the expansion of domestic demand, something that economists say is necessary to push China’s economy beyond its reliance on investment.
China’s outgoing Premier Li Keqiang has announced the country’s lowest GDP growth target in decades, highlighting the domestic and global challenges the world’s second largest economy still faces despite its decision late last year to ditch draconian anti-Covid measures.
“Insufficient demand is still a prominent issue,” Li said Sunday. “Stabilizing employment is tough. Some local governments have difficulties with their finances.
China is in the midst of a historic downturn for the all-important housing market. Consumer spending isn’t very fast. The unemployment is high among the youth.
In an address to the nation rarely heard from top officials, Li called on the policymakers to face up to the problems in order to improve the work of the government.
Mass protests erupted late last year across the country, in a rare show of dissent against the ruling Communist Party sparked by anger over its zero-Covid policy. Hundreds of old people confronted local officials in northeastern and central China last month to oppose changes to their health insurance that had reduced their medical benefits.
The end of the pandemic, China’s government is conservative but pragmatic: reducing GDP target slowly and creating jobs in the next five years
The 5% growth target suggests the government is conservative but pragmatic about the economic prospects in the future with a weakened global economy and a still moderate recovery in the housing sector.
“Having declared the end of pandemic, the leaders are sticking to the slowing GDP growth path in the long term by lowering annual GDP target gradually,” said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank.
He set a goal to create around 12 million jobs in the country this year, up from the 11 million that he had previously said would be created.
Beijing will also allow local governments to issue up to 3.8 trillion yuan ($550 billion) in special bonds in 2023, which will help them build 5G networks, railways, airports and other infrastructure projects, Li added.
Last year, the government had a deficit of around 8% to 9% per GDP, which reduced it’s fund-raising power, she explained.
Premier Li also said the government would only raise fiscal spending by 5.6% this year, which is lower than the growth of 6.1% in fiscal spending in 2022.
According to the finance ministry’s latest budget report, local government revenue is expected to grow by only 0.4% this year, an indication of Beijing’s conservative forecast on land sales.
Local governments have relied heavily on land sales in the past as a source of revenue but those receipts contracted by 23% in 2022, dealing a blow to finances already strained by huge Covid spending.
The fiscal resilience of the governments could be improved after three years of anti-pandemic measures.
“Eyeing … fiscal repair and aware of inflation risks, the government work report provides no hint [of] massive fiscal or monetary stimulus,” they said.
The People’s Bank of China won’t use “flood-like” measures to boost growth, as it seeks to strike a balance between boosting the economy and keeping prices stable, said a deputy governor earlier this month.