China to unveil lowest growth goal in years: analysts

Thousands of party delegates from across China will converge on Beijing for a rubber stamp conclave set to confirm key personnel appointments and make policy for the coming year.

Among the first declarations is expected to be a target for gross domestic product growth over the coming 12 months, announced by outgoing Premier Li Keqiang at Sunday’s opening ceremony.

Last year, the economy expanded just three percent, one of its weakest in decades on the back of the Covid-19 pandemic, lockdowns and a real estate crisis.

And economists surveyed by AFP predicted goals for 2023 will be conservative, expecting policymakers to aim for 5.3 percent, one of the lowest targets in decades.

China’s housing market, which along with construction accounts for more than a quarter of GDP, remains in a slump, having been dealt a hefty blow since Beijing started cracking down on excessive borrowing and rampant speculation in 2020.

Real estate sales have since fallen in multiple cities and several developers are struggling to survive, while many homebuyers last year refused to pay mortgages on incomplete properties.

“Sales, commencements and prices are all lower,” Moody’s economist Harry Murphy Cruise said.

“Property developer defaults in late 2021 left more than a million pre-sold homes unfinished, spooking households, and prompting many to turn their back on the market.”

An ailing international outlook was also likely to drag on growth, with economists warning of a slump in the world economy as countries battle soaring costs and central banks simultaneously hike interest rates to cool demand.

“We see empty containers piling high at Chinese ports,” Gene Ma, head of China research at the Institute of International Finance, told AFP.

“Export demand is rapidly disappearing due to weaker global growth and supply-chain migration.”

Meanwhile, commentators warned that geopolitical tensions posed a threat to China’s economic prospects — particularly if Beijing chooses to further involve itself in Russia’s war in Ukraine.

“One big risk (if not the biggest) would be China actively supporting Russia with weapons and ammunition,” Teeuwe Mevissen, China economist at Rabobank, told AFP.

“This would almost certainly lead to Western sanctions.”

What growth does come will be driven by a surge in consumption demand, economists said, as the country emerges from almost three years of Covid restrictions.

“With signs of a recovery in consumer confidence, pent-up demand amid normalization, and stronger economic activity supporting the labour market, we think services consumption stands to benefit the most,” Jing Liu, Greater China Chief Economist, HSBC Global Research, wrote in a recent report.

The Institute of International Finance’s Ma, agreed, telling AFP his group expected a surge in household consumption, from a 0.2 percent contraction last year to nine percent growth in 2023.

“Considering household consumption is about 40 percent of GDP, household consumption alone can push GDP higher by 3.5 points,” he said.