Pushing for Post-COVID Rebound, China Targets GDP Growth Of ‘Around 5%’ This Year

China is targeting economic growth of “around 5%” this year, and will take steps to catalyze a rebound after stalling under the weight of strict COVID controls last year, according to the country’s outgoing premier, Li Keqiang.

The target is slightly lower than last year’s goal of “around 5.5%”, which was set before the highly-transmissible Omicron variant of COVID-19 collided the government’s “zero COVID” policy, leading to mass lockdowns, forced quarantines and a sharp drop-off in economic activity.

Official statistics show that the economy grew just 3% last year — among the slowest rates since market reforms began after Chairman Mao Zedong died in the late 1970s — although some economists suspect the growth rate may actually have been lower.

“This year, it is essential to prioritize economic stability and pursue progress while ensuring stability. Policies should be kept consistent and targeted, and they should be carried out in a more coordinated way to create synergy for high quality development,” Li said at the opening ceremony of an annual series of meetings of the country’s parliament, the National People’s Congress.

The meetings, involving about 3,000 delegates from across the country, are a chance to review the year’s achievements and preview upcoming legislative proposals, though delegates rarely cast dissenting votes.

China also announced on Sunday it would increase military spending this year by 7.2% from the year before, for a total of 1.55 trillion yuan ($220 billion). That’s far below the nearly $800 billion the U.S. is projected to spend in 2023.

But for the past two decades, China’s military budget has been steadily increasing, first at a double digit pace until 2016 before dipping down to around 6% to 7% increases annually. The country has embarked on an ambitious military modernization project to reorganize its fighting forces and invest more in defense technologies.

China’s parliamentary spokesperson Wang Chao told reporters this weekend that the budget increase this year was quote “relatively moderate and reasonable” and a response to the “complex security challenges” in the world.”

Li also re-hashed old language on Taiwan, suggesting that China’s attitude towards the self-governed island has not changed, with Beijing preferring to “re-unify” with the island peacefully rather than by use of force.

“We must persist in implementing the Party’s overall strategy for resolving the Taiwan issue,” he said. “It is necessary to promote economic and cultural exchanges and cooperation between the two sides of the strait.”

For the most part, Li’s speech — a kind of “state of the union” delivered to the National People’s Congress — focused heavily on the economy, an area of policy that he has nominally been in charge of since 2013.

He said the government should deepen reform and opening and boost market confidence, something that has been hurt by harsh “zero COVID” policies, as well as crackdowns in recent years that have hurt tech, education, real estate and other sectors of the economy.

Analysts say Li’s authority has been curtailed by Chinese leader Xi Jinping, who played more direct role in the economy than his recent predecessors. Li is set to retire in about a week when parliament picks a new premier.

Xi ally Li Qiang, a former Communist Party boss in Shanghai and neighboring coastal provinces, is widely expected to get the job, in an appointment that many see as part of Xi’s efforts to consolidate his grip on power as he embarks on a rare third term as state president. (The two Lis are not related.)

Since the government ended its COVID controls late last year, it has been signaling that the economy would be the top policy priority this year.

In his speech on Sunday, Li Keqiang repeated calls for the government to prioritize the expansion of domestic demand, something that economists say is necessary to push China’s economy beyond its reliance on investment.

Li also urged “unswerving” support for the private sector, a driver of innovation and growth regularly takes a back seat to the state sector