China sets ambitious growth target, vows to 'transform' economy

Chinese Premier Li Qiang announced an ambitious 2024 economic growth target of around 5 percent on Tuesday, promising steps to transform the country's development model and defuse risks fuelled by bankrupt property developers and indebted cities.

Delivering his maiden work report at the annual meeting of the National People's Congress, China's rubber-stamp parliament, Li also flagged higher defense spending while hardening the rhetoric on Taiwan.

In setting a growth target similar to last year, which will be harder to reach as a post-COVID recovery is losing steam, Beijing signals it is prioritizing growth over any reforms even as Li pledged bold new policies, analysts said.

"It's more difficult to achieve 5% this year than last year because the base number has become higher, indicating that the top leaders are committed to supporting economic growth," said Tao Chuan, chief macro analyst at Soochow Securities

"We should not lose sight of worst-case scenarios," Li said in the Great Hall of the People in Tiananmen Square.

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

There was no timeline or concrete details for the structural changes China intended to implement; however, Li also emphasized stability as "the basis for everything we do."

Li acknowledged that reaching the target "will not be easy," so adding a "proactive" fiscal stance and "prudent" monetary policy was needed. The target considers "the need to boost employment and incomes and prevent and defuse risks," Li said.

The International Monetary Fund projects China's 2024 growth at 4.6 percent, declining towards 3.5 percent in 2028.

"Policymakers seem happy with the current trajectory," said Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management.

"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."

China plans to run a budget deficit of 3 percent of economic output, down from a revised 3.8 percent last year. Crucially, it plans to issue 1 trillion yuan ($139 billion) in special ultra-long-term treasury bonds, which are not included in the budget.

Reuters