China aims for economic transformation with 5pc growth target: Report

Premier Li Qiang outlined ambitious plans for China's economic future during his maiden work report at the National People's Congress on Tuesday.

According to Reuters, China is targeting a growth rate of around 5 per cent this year, highlighting the need for a transformative shift in its development model.

The premier addressed concerns of deep structural imbalances, a property crisis, deflation, and mounting local government debt.

"We must push ahead with transforming the growth model, making structural adjustments, improving quality, and enhancing performance," Reuters quoted him as saying.

The growth target mirrors last year's, but achieving it will require stronger government stimulus, given the economy's reliance on state infrastructure investment.

A sluggish post-COVID recovery has exposed China's structural weaknesses, prompting calls for a new development model.

Li acknowledged the challenges, saying, “We should not lose sight of worst-case scenarios and should be well prepared for all risks and challenges."

Analysts remain cautious about the effectiveness of China's plans.

Chinese stocks recovered from earlier losses, and the yuan remained flat, indicating investor scepticism.

Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management, remarked, "That’s disappointing for those that hoped for a bigger push... There’s rhetorical support for local government debt and the property sector, but the key is how this is applied in practice."

In pursuit of stable growth, China plans to run a budget deficit of 3 per cent of economic output, down from 3.8 per cent last year.

Notably, it will issue 1 trillion yuan ($139 billion) in special ultra-long-term treasury bonds, a move not included in the budget.

The government aims to lower its annual growth ambitions in the future, with the International Monetary Fund projecting China's economic growth at 4.6 per cent this year and further declining to about 3.5 per cent in 2028.

The work report also addressed geopolitical concerns.

China affirmed its commitment to reunification, dropping the term "peaceful reunification."

Officials pledged to "resolutely oppose separatist activities aimed at 'Taiwan independence' and external interference."

Defence spending will increase by 7.2 per cent, consistent with the previous year, marking the ninth consecutive single-digit annual increase.

The defence budget is being closely monitored by neighbouring countries and the US due to rising tensions, especially concerning Taiwan.

In the realm of technology and innovation, China remains committed to President Xi Jinping's vision of "new productive forces."

The country plans to lift all foreign investment restrictions in the manufacturing sector and relax market access restrictions in service industries.

Beijing will also focus on developing emerging industries, including quantum computing, big data, and artificial intelligence, striving for self-sufficiency in technology.

However, some analysts express concerns about China's emphasis on high-tech manufacturing, fearing it may exacerbate industrial overcapacity and heighten trade tensions with the West.

(With inputs from Reuters)