The Gross Domestic Product (GDP) growth target is due to be presented in principle on Sunday in a speech by outgoing Prime Minister Li Keqiang at the opening of the annual parliamentary session that will bring together some 3,000 delegates from across the country in Beijing.
The second world economyHit hard by anti-covid restrictions in place for almost three years, it recorded growth of just 3% in 2022, one of the worst in 40 years.
For 2023, China is expected to be cautious: a consensus of economists questioned by AFP forecasts a target of 5.3%, one of the lowest in decades. Last year, Beijing was set at 5.5%.
Even if the health restrictions ended in December, China’s economic recovery may suffer from the poor health of the housing market.
Together with construction, the sector represents a quarter of national GDP and played a key role in the post-pandemic recovery in 2020. But then it weakened.
Many developers are struggling to survive after a tightening of the conditions of access to credit by Beijing and a fall in real estate sales.
In addition, many buyers refused to pay their monthly payments last year, fed up with the delays in the delivery of their homes.
“Sales, construction starts and prices are all down,” says Harry Murphy Cruise, an economist at Moody’s.
“The bankruptcies of real estate developers at the end of 2021 left more than a million unfinished pre-sold houses, which scares consumers and leads them to turn their backs on the market,” he adds.
The international context does not help. Many economists fear a global slowdown in a context of rising prices and rising interest rates by central banks to curb inflation.
“We see empty containers piling up in Chinese ports,” Gene Ma, director of the China research department at the Institute of International Finance, told AFP.
“Demand for exports is falling rapidly due to weak global growth and shifting supply chains,” he says.
Geopolitical tensions are also weighing on China’s growth prospects, according to these economists, who are concerned about a possible involvement of Beijing to support Russia in the war in Ukraine.
“A big risk, indeed the most important, would be China actively supporting Russia with weapons and ammunition,” Teeuwe Mevissen, a China specialist at Rabobank, told AFP. “This would certainly lead to Western sanctions,” he adds.
According to experts, consumption will be an important factor in the recovery of the Chinese economy.
In a recent report, Jing Liu, chief China economist for HSBC Global Research, points to “signs of a rebound in consumer confidence” and “stronger economic activity that is supporting the labor market.”
Gene Ma shares his optimism, noting that his Institute of International Finance expects household consumption to rise from -0.2% last year to +9% this year.
“Knowing that household consumption represents around 40% of GDP, this alone can make GDP progress by 3.5 points,” he predicts.
