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China says its economy will grow ‘around’ 5% this year

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BEIJING — China will aim for economic growth of “around” 5% this year, Premier Li Qiang said Tuesday, outlining Beijing’s plans to overcome a slowdown that has shaken consumer and investor confidence in the second-largest economy worldwide.

China will “make full use of a new system of nationwide resource mobilization” to achieve “breakthroughs in core technologies in key areas”, Li said in a speech at the Great Hall of the People to mark the The opening of the National People’s Congress, the National People’s Congress of China. approve Parliament without discussion.

These include “disruptive and cutting-edge technologies,” he said. The growth target is in line with economists’ expectations and only slightly below the 5.2% recorded last year, but it is far from the double-digit growth of the early 2000s.

More than 5,000 delegates gather here for the annual meetings of the NPC and China’s top consultative body, events jointly known as the “Two Sessions,” which together set the political agenda for the coming year .

This promises to be difficult. In the year since Xi Jinping, the country’s powerful leader, officially began his third term, huge real estate giants were liquidated, foreign direct investment fell to a 30-year low and markets began the year with a 10 percent drop.

Beyond these immediate pressures, Beijing faces mountains of local government debt, a shrinking population and the potential for new tensions with the United States as China becomes the center of the presidential campaign debate.

So far, China’s leaders appear ready to batten down the hatches, ride out the turmoil and focus on long-term bets to control the technologies of the future.

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Xi’s security-focused approach – which attempts to defuse the most serious economic and financial risks while focusing on local innovation in key emerging industries – “naturally lends itself to pushing the economy to align on this long-term strategy,” said Diana Choyleva. founder of Enodo Economics, a consulting firm.

“They are trying to ease what will be a painful adjustment,” Choyleva said. “But this plan is very different from what foreign and international investors want to hear. »

This year is the first time Li has submitted a “work report”, having been promoted to No. 2 on the powerful seven-member Politburo Standing Committee in October 2022. Already, it appears he will be less transparent than his predecessor, Li Keqiang. , who died of a heart attack just seven months after leaving office.

An NPC spokesperson announced Monday that the premier, who is responsible for the day-to-day management of China’s economy, would not hold a press conference after the closing ceremony this year, ending a demonstration opening in place since the start of the ceremony. 1980s. The news conference is one of the rare occasions when the Chinese public and foreign observers can hear a senior Chinese leader answer questions, even if they are pre-selected.

Political signals at this year’s meetings are being watched all the more closely because top Communist Party officials were expected to outline an economic agenda at a plenum late last year, but the gathering never took place. occurred.

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The delays and opacity have fueled concerns that Beijing plans to ride out the recession with piecemeal policy support instead of bold steps to boost growth.

“The long delay of the plenum means that there is no road map for economic reform, at least not in the public domain,” said Nis Grünberg, senior analyst at MERICS, a German think tank focused on China.

Instead, Grünberg added, constant messaging from senior Chinese officials suggests that state control will prevail, as the emphasis on security and “self-reliance” limits the desire to liberalize economic reforms.

Xi’s main announcement in the run-up to the meetings was a reminder of the Communist Party’s Marxist roots. In December, he asked officials to unleash “new productive forces” to avoid a sharp slowdown, leaving foreign investors to delve into pages of jargon to understand what that means for markets and businesses.

“The essence of innovation is ‘establishing a new production function’, which means introducing into the production system a ‘new combination’ of conditions and production factors that have never existed before,” he said. said Chen Binkai, dean of the Faculty of Economics at the Central University of China. Finance and economics, explained Qiushi, a Communist Party magazine.

Close observers of Chinese politics say Xi’s announcement is less about economic policy and more about establishing his historic leadership position by following the example of past strongman leaders.

Mao Zedong, the founder of the People’s Republic, called for the “liberation” of workers from feudal society. Deng Xiaoping, initiator of market reforms in the 1980s, promised the “development” of production through science and technology.

Xi now wants China’s workforce to benefit from a high-tech upgrade that can keep the economy afloat and ensure its dominance in strategically important emerging sectors like clean energy, artificial intelligence and semiconductors.

Economists widely agree that China needs to abandon the old growth model, which relied on debt-fueled construction. But there is little consensus on whether executives’ focus on advanced manufacturing will be enough to prevent a sudden slowdown.

Some say the authorities would benefit from boosting consumption through a mix of short-term subsidies and structural reforms to health care and social services, so that the poorest feel empowered to spend again.

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Prominent voices in China warn that Xi’s policies favoring heavy-handed state interventionism go too far and stunt innovation in policymaking.

“Civil servants at all levels no longer have the space to make decisions for themselves, economic activity is constrained and less dynamic, and social freedoms have been restricted,” wrote Yao Yang, dean of the National Development School of Peking University, in a press release. article translated and published last week by Sinification, a newsletter.

In the academic journal originally published in December, Yao argued that decades of unbridled and unsustainable growth had plunged China into a period of “rectification” comparable to what the United States faced before the 2008 financial crisis.

For Yao, the methods used by leaders to try to reassert control – crackdowns on the “over-marketization” of the economy and an emphasis on Marxist notions of egalitarianism – have been excessive and have frightened entrepreneurs and the wealthy .

“The Party’s official theories are still stuck in Marx’s doctrines and lag far behind the realities of the reform and opening-up period,” he said.

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