SINGAPORE/HONG KONG : China’s parliament has set what analysts said was a conservative growth target for 2023, leaving investors relieved policymakers were aware of the multiple headwinds the economy faces and yet focused on longer term priorities.
Even as China recovers from COVID-19 disruption, weaker demand at home and abroad, alongside a property downturn pose risks for the world’s second-largest economy, amid hopes for more support for private firms after a crackdown on tech companies.
Chinese stocks fell on Monday, a day after the National People’s Congress (NPC) unveiled a growth target of about 5 per cent, slightly lower than the 5.5 per cent to 6 per cent some analysts had expected, although bonds and the yuan did not react.
Opening the annual session of the NPC on Sunday, outgoing Premier Li Keqiang stressed the need for economic stability and expanding consumption in his work report, and set a budget deficit target of 3.0 per cent of gross domestic product (GDP), wider than a goal of about 2.8 per cent last year.
“Despite slightly weaker than expected growth target, we don’t think market should be disappointed by this government work report as the underlying details showed that growth continues to top the priority for 2023,” said Tommy Xie, OCBC’s head of Greater China research.
The onshore yuan edged just marginally lower on Monday, at 6.9197 per dollar. Stocks, however, slipped, with China’s blue-chip CSI 300 falling more than 0.7 per cent.
Details were sparse in Li’s speech, disappointing investors who had hoped for some explicit mention of stimulus for consumers hard-hit by three years of COVID lockdowns.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the 5 per cent target should be taken as the bare minimum the government wants, and the absence of stimulus was unsurprising given the early signs of recovery.
China’s factory activity has roared back to life following the reopening, with February’s manufacturing purchasing managers’ index data smashing expectations and clocking its highest reading in more than a decade.
Analysts at Morgan Stanley said China’s recovery was “self-sustaining” and retained an above-consensus forecast of 5.7 per cent growth for 2023.
Tao Wang, head of China economic research at UBS Investment Bank, said he had raised his forecast to 5.4 per cent from 4.9 per cent previously.
“Given the complete reshuffling of the government, a key issue to watch in the next few months is how the new leaders will boost private sector confidence. This is more important than the fiscal and monetary policies, in my view,” Pinpoint’s Zhang said.
Li and a slate of more reform-oriented economic policy officials are set to retire during the congress, making way for a new economic team in the biggest government reshuffle in a decade. Former Shanghai party chief Li Qiang, a longtime ally of President Xi Jinping, is expected to be confirmed as premier.
“Given that this is the year of government leadership transition, the NPC Government Work Report was relatively brief in describing this year’s policy measures, likely leaving the details for the new government,” said UBS’ Wang.
Among other things, China plans to lower the costs of childbirth, childcare and education, as well as to double down on its push to be self-reliant in technology, in a nod to Xi’s goal of common prosperity and self sufficiency.
“We don’t think the market was expecting any major stimulus arising from this NPC,” said to Elizabeth Kwik, investment director of Asian equities at abrdn.
“While the fiscal spending may be modest, we would need to bear in mind that the central government has a policy arsenal of tools at its disposal if there is a need to provide more support for the economy.”
Zhou Hao, an economist at Guotai Junan International in Hong Kong, pointed to the higher target for job creation, 12 million for 2023, as a sign consumption was being prioritised.
“A higher target for 2023 means that the Chinese authorities see the importance of consumption, which will help unleash long-term growth potential,” he said.
Shares of Chinese property developers however took a hit, after the government warned that risks remained in the market. The CSI 300 Real Estate Index fell more than 2 per cent.
(Additional reporting by Ellen Zhang in Beijing; Editing by Vidya Ranganathan, Robert Birsel)