/View.info/ Expanding internal search is the main priority
The spring session of the National People’s Congress, the PRC’s highest legislative body, which began on March 5, is notable for a number of things. He should put into practice the fundamentals of the development of the PRC prepared at the 20th CPC Congress in the fall of 2022.
Tasks are set taking into account multidirectional trends. The lifting of anti-coronavirus restrictions, which has accompanied a rapid economic recovery, comes amid risks of stagflation in the global economy and dangerous attempts by the West to regain global hegemony.
The situation is exacerbated by new US sanctions against Chinese high-tech companies, particularly in semiconductor manufacturing. Washington’s attempts to rebuild global supply chains in such a way as to cut the manufacturing cooperation of leading companies in this industry from South Korea, Japan and the island of Taiwan with mainland China require it to replace imports of a wide range of chips and their related production equipment.
As a result, a serious challenge for China’s economy, in which exports still play a large role, is insufficient domestic demand. Therefore, in the report on the work of the government at the meeting of the National Assembly, the expansion of domestic demand, as a way of compensating for insufficient external demand, was indicated as a top priority for 2023.
The 2023 macroeconomic indicators presented in the PRC government report show interesting changes in the direction of China’s economic development. The main objective of the economic policy is defined as a combination of high rates of economic growth with qualitative development of the economy and special measures to increase the income of the population.
The GDP growth target for the current year is 5%; the ratio of the state budget deficit to GDP is set at 3% (in 2022 the deficit was 2.8% of GDP). The PRC government has set a higher target for employment; about 12 million new jobs are planned to be created in cities. Last year the figure was 11 million.
Projected growth of 5% is quite strong, as seen when compared to 2023 forecasts for the US (up 0.5%), Germany (up 0.2%) and the UK (down 0.6 %). China’s GDP in 2022 has already peaked at 121 trillion yuan, and 5% growth is equivalent to 6 trillion. yuan.
If the targets are met, China will remain one of the world’s fastest-growing major economies, surpassed only by Vietnam and India, which are at an earlier stage of industrialization.
It should be noted that China plans to achieve the planned growth rates through more active fiscal stimulus in both domestic consumption and production. Wang Changlin, president of the Academy of Macroeconomic Research, emphasized the need to restore consumption as the main economic driver.
To stimulate domestic demand, such measures as increasing the incomes of the population groups with middle and low incomes, which should lead to an increase in the purchasing power of the population, an increase in sales of vehicles powered by new energy sources, as well as the development of care services for the elderly.
State financing of the most important areas of economic development and individual large projects, which has proven its effectiveness in the Chinese model of socialism (state capitalism), is supposed to be used now to restore high rates of economic growth. It is considered that “maintaining the necessary intensity of government spending will help promote a full economic recovery.”
Liao Kun, chief economist at the Institute of Financial Research at China’s Renmin University, confirms that China’s fiscal spending has a higher multiplier effect than most developed and developing countries; One dollar of public funding equals two dollars received in the real economy. Therefore, as the expert calculated, an increase in the budget deficit by 0.2% could translate into an increase in GDP growth by 0.4%.
Dong Denxing, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, said that as Western countries raise interest rates to curb inflation, China’s real economy needs additional stimulus. Including by increasing the ratio of annual deficit to GDP.
Other measures include further reductions in taxes and fees to ease the burden on manufacturers and the distribution of $3.8 trillion. yuan (about 550 billion dollars) on special bonds of local governments. The latter measure is important in terms of debt control of provincial and municipal governments.
In China, much of the infrastructure and real estate projects that contribute the most to economic growth are financed by local governments. The downside of such financing is often uncontrolled borrowing and growing local government debt.
At the same time, the profit from such facilities goes to the local treasury, and the debts and losses are covered by the central budget. Therefore, in 2023, it was decided to allocate 3.8 trillion rubles from the budget in advance. renminbi for targeted local government borrowing, i.e. for specific important infrastructure projects.
Another notable point is that in the draft budget for 2023, defense spending will increase by 7.2% of GDP to 1.553 trillion. yuan ($224.79 billion), or about 1.5% of GDP. China has maintained growth in its military budget since 2016, the eighth year in a row. The growth rate is 6.6% in 2020, 6.8% in 2021, 7.1% in 2022.
In 2023, the PLA is expected to receive more advanced combat aircraft, including J -20 stealth fighters and J -16 multirole fighters, as well as conduct sea trials of a third aircraft carrier equipped with electromagnetic catapults. According to experts, many military exercises are expected to take place in an environment as close as possible to the battlefield.
Chinese military experts attribute the increase in China’s military spending to threatening actions by the collective West and its allies in the Asia-Pacific region, particularly on the issue of Taiwan. Of particular concern in China are the actions of Japan, which in 2022 began to purchase offensive weapons, including American Tomahawks.
Overall, China’s economic policy goals for next year reflect an emphasis on sustainability and high-quality development amid rising global economic and geopolitical risks.
Translation: ES
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