China has set a target of a five per cent growth rate for 2023, which is one of the lowest targets set in the past decades of China’s economic policy. In 2022, the economy of China grew by 3 percent only as against the set target of 5.5 per cent. Multiple reasons worked behind this less-than-expected growth rate, major ones being covid-19 lockdowns, the America-China trade war, and a slump in the property sector of China.
The Chinese government would be aiming for three per cent of the Gross Domestic Product (GDP) as the fiscal deficit in 2023. Last year the fiscal deficit aim was set at 2.8%. The Chinese government is all set to work extensively on job creation by aiming to generate 12 million new urban jobs this year as against the target of 11 million jobs in 2022. To avoid a large budget deficit, the Chinese government is avoiding the excessive issuance of special government bonds.
WHY THE CHINESE GOVERNMENT IS CAUTIOUS?
Though recent data shows a fast-paced recovery for China, other factors worry the government and thus it has set a lower target for growth which according to many experts is a safe aim. Property sales in China are dwindling forcing the developers to face pressure. The exports also showed dismal performances for the months of October, November, and December 2022 for China. Demand is not soaring as expected and employment rates are still unstable in China. Many local governments in China are enveloped in huge fiscal problems. To help the local governments, they would be allowed to issue 550 billion dollars as special bonds in 2023. This would eventually help the local governments to undertake investments in infrastructure projects like railways, airports, etc. along with building 5G networks. Local governments in China are lacking funds primarily because of a contraction in land sales. In 2022 land sales receipts were reduced by 23% causing a blow to the local government’s finances, which were already under huge pressure due to covid spending.
Consumers are not willing to spend and thus business confidence is adversely affected. Business houses suffered due to regulatory restraints on the private sector by the Chinese government. Another problem being faced by China is its worsening relationship with the United States. The two countries are often at loggerheads which has escalated apprehensions regarding the technological sector and investment. Foreign investment too has decreased in China.
It has been highlighted by the Chinese government that presently its priority is to stabilize the economy rather than to emphasize growth figures. Experts say that self-reliance is at the core of economic policies. The global economy is expected to receive less or no help from China as it is caught with its woes. One positive impact expected by China’s new economic goals is restraining inflationary pressures in the world. The experts in Europe expected a resurgence in inflation after China completely eased its covid restrictions. But the less ambitious China is expected not to worsen the global inflationary pressures. Many economists opine that the era of China’s high growth is now over. However, some experts assert that the attainability of the economic growth target by China is not very difficult and it may even cross 5 per cent. All-in-all the communist government in China is focused on long-term challenges of growth to make its economy rebound.