China sets 5% GDP growth target for 2024 amid economic challenges

Li Qiang, the deputy to President Xi Jinping, unveiled a strategy aimed at maintaining the previous year's GDP growth rate of approximately 5% for 2024 during the National People's Congress, a gathering of 2,800 delegates. China observed a slight increase in GDP growth to 5.2% in 2023, following a modest 3% in the previous year. The authorities also anticipate a rise in inflation to around 3% by year-end.

Beijing plans to spur growth through the issuance of long-term maturity central government bonds amounting to a trillion yuan ($139 billion). Announcing a proactive fiscal approach, the government expects the fiscal deficit as a percentage of GDP to reduce to 3%, down from 3.8% the previous year.

Although ambitious, Beijing's growth target of 5% for 2024 is deemed challenging by analysts quoted by the "Financial Times."

A variation from past practices, with an emphasis on the long-term goals like green transformation, developing the digital economy, and promoting innovations, the annual meeting of Chinese party activists highlighted the government's commitment to maintaining economic equilibrium. According to ING experts, this approach marks a departure from previous heavy stimulus measures, such as those involving the real estate sector.

The authorities are also supporting new consumer sectors, including automotive, home appliances, and services like catering, tourism, and recreation, which have shown promising performance. The recovery from the pandemic is slower than anticipated, hampered by structural challenges like the real estate crisis and the significant debt of local governments.

Furthermore, the government aims to boost development in artificial intelligence and the military sector, with defense spending expected to reach 7.2% of GDP.