China announces lowest GDP target in decades and warns of "serious" outlook

China’s first minister, Li Keqiang, announced the unusually modest goal, the lowest since 1991, in his speech at the opening of the annual session of China’s official parliament – AFP

China on Saturday set its lowest gross domestic product (GDP) target in several decades, with Prime Minister Li Keqiang warning of a “severe and uncertain” outlook in the context of the coronavirus pandemic, declining housing sector and of the war in Ukraine.

Li announced a modest growth target of around 5.5% – the lowest since 1991 – in his opening speech at the annual session of the Chinese legislature.

Addressing nearly 3,000 members of the National People’s Congress (CNP) in the Great Hall of the People, Li said the world’s second-largest economy “will encounter more risks and challenges.”

“We have to continue to overcome them,” he added.

The goal is to keep employment stable, cover basic needs and “protect yourself from risk”, the Chinese version of the State of the Union said in the speech.

The objective of growth is closely watched in China because the Communist Party bases its legitimacy on the steadily expanding economy, something that has improved the living conditions of the population.

The party worries about any possibility of social instability that affects economic growth.

– Stability, the priority –

Economic stability must be the “highest priority,” Li said.

Each year’s parliamentary session consists of a week of meetings to establish the party’s political priorities, economic expectations and foreign policy objectives. This year’s event has as its ingredient President Xi Jinping’s intention to further consolidate his power.

Chinese economic growth has registered a considerable deceleration in recent years compared to the ‘boom’ of previous decades, with advances that at times exceeded 10%.

The country was recently affected by the real estate market crisis, strict regulations in the real estate, technology and financial sectors, as well as outbreaks of coronavirus that led to confinement measures.

China’s economy, a key indicator of global growth, surpassed the official target of at least 6% growth last year, reaching at one point in the year to reach 8.1%.

However, in the second half of the year, the deceleration was very strong.

China’s “covid zero” policy managed to contain the pandemic and allowed the economic recovery at first, but a series of outbreaks of the coronavirus – fought with severe containment measures in recent months – affected consumer demand.

Also weighing on Beijing’s campaign to curb excessive debt and consumer speculation.

Despite the worldwide uncertainty caused by the war in Ukraine, Li did not directly cite the conflict. China has so far avoided openly condemning the actions of Russia, its diplomatic ally.

In this scenario, the government also announced a 7.1% increase in China’s military budget – the second largest behind the United States – to 1.45 trillion yuan (US$230 billion) in 2022, following the trends of the last years.

China has devoted billions of dollars to transforming its massive army into a world-class world force, similar to the Armed Forces of the United States and other Western powers.

For the third year in a row, the Chinese legislative meeting takes place in a reduced way due to covid.

Lawmakers are due to discuss strategies to increase the number of births in the country, after analysts warned of fears of a demographic crisis: the birth rate fell to an all-time low last year.

In addition to the annual session, the Communist Party of China is preparing for the 20th Party Congress at the end of the year.

The meeting, which takes place every five years, is expected to approve Xi Jinping’s third term, following a change in the constitution to eliminate the term limit.