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China sets modest growth target, expands defense budget

March 5, 2023

As the National People's Congress opened this year's session, China set an economic target of "around 5%" — one of the lowest in decades — and announced a 7.2% increase in its defense budget.

China's President Xi Jinping (R) speaks with National People's Congress Chairman Li Zhanshu during the opening session of the National People's Congress
The legislature's session is expected to tighten President Xi Jinping's control over business and societyImage: Noel Celis/AFP/Getty Images

China kicked off the annual session of its parliament on Sunday, with the economy being the overarching theme.

Outgoing Premier Li Keqiang, the top economic official, set a modest target for economic growth of "around 5%" for the year. 

China's economic growth fell to 3% last year, the second-weakest level since at least the 1970s.

Consumption-driven growth

"We should give priority to the recovery and expansion of consumption," Li said in a speech to the National People's Congress (NPC) session, which will run through March 13.

Beijing is hoping for an economic rebound by encouraging consumers to spend more since coronavirus restrictions have been lifted.

Li stressed the need for economic viability to create more urban jobs, and warned that risks remain in the real estate sector. 

Iris Pang, chief economist for Greater China at ING, told DW that Beijing is aiming to bring 12 million more people into the job market this year and has a target of 11.58 million new graduates. But some groups may still find it difficult to find work.

"Construction activities won’t be picking up in the first half of 2023 due to the slowing of infrastructure projects, so it means some of the low-income groups may struggle to land jobs or find jobs that will increase their wages, even though 2023 is the year of recovery," she told DW. "This means the wealth gap in China will widen again and this is not the objective of the government."

National People's Congress begins in Beijing

"The GDP growth target is a bit more conservative but this is entirely feasible, barring major shocks that we saw last year," Bert Hofman, professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, told DW. 

"It's quite positive that the Chinese government remains rather conservative because it means they don't need to overstimulate the economy to get that target done," Hofman added.

Military budget increase in face of 'escalating' threats

According to the draft budget presented at the start of the NPC session, China is also planning a 7.2% increase in its defense budget for the coming year, up slightly from last year's 7.1% rate of increase.

Li told the NPC delegates that "external attempts to suppress and contain China are escalating."

China is the world's second-largest defense spender. Its planned budgets for the year put defense spending at 1.55 trillion yuan ($225 billion, €211 billion).

"The defense budget increase has of course concerned neighbors as well as the countries across the Pacific," Hofman told DW. 

"China is still very much building up its military at this point, so I don’t think this is much of a surprise in terms of the acceleration of the buildup compared to what we saw in the past," he added.

Pledging Taiwan 'peaceful reunification'

On Taiwan, Li said Beijing should advance the process of "peaceful reunification" while taking steps to oppose Taiwan's independence.

"As we Chinese on both sides of the Taiwan Strait are one family bound by blood, we should advance economic and cultural exchanges and cooperation across the Taiwan Strait and improve the systems and policies that contribute to the wellbeing of our Taiwan compatriots," Li said. 

Taiwan's government on Sunday emphasized that China should respect the core principles of sovereignty, democracy, and freedom that are important to the Taiwanese people.

Taiwan's Mainland Affairs Council, which is responsible for shaping policy toward Beijing, also urged China to approach cross-Taiwan Strait issues in a pragmatic, fair and mutually respectful manner.

The council emphasized the importance of finding a peaceful resolution to the ongoing tensions between China and Taiwan.

NPC meeting to tighten Xi's grip on power

The meeting of 2,977 members of the NPC is the year's highest-profile event, but its work is limited to endorsing decisions made by the ruling Communist Party.  

As a result, there are no debates and all documents and decisions are expected to receive unanimous support. 

Chinese President Xi Jinping attends the opening of the first session of the 14th National People's Congress
Nearly 3,000 delegates were attending the NPC sessionImage: Lintao Zhang/Getty Images

This year's gathering also comes at the start of China's latest five-year political cycle, as an addendum to the ruling Communist Party's 20th annual congress in October.

There, President Xi Jinping secured a historic third term and cemented his iron grip on power.

In the coming days, the NPC will see Xi renamed head of state, the replacement of Li Keqiang as premier and the appointment of other top members of the State Council, China's Cabinet. 

With reporting from DW's William Yang in Taipei

ab, rm/fb (Reuters, AP, AFP, dpa)