China set an economic growth target of around 5% for this year and mapped out a policy course aimed at fortifying its military capabilities, developing advanced technology, and buoying consumer spending in a bid to hit that ambitious goal.
In a work report delivered Tuesday at the start of China's annual legislative sessions, Premier Li Qiang acknowledged that achieving 5% gross domestic product growth "will not be easy" following the country's disappointing recovery from ending its zero-Covid policies.
"The foundation for China's sustained economic recovery is not yet stable, with insufficient effective demand, overcapacity in some industries, weak social expectations, and still many risks and hidden dangers," Mr. Li cautioned delegates gathered in Beijing's Great Hall of the People.
Policymakers highlighted various growth drivers in Mr. Li's inaugural report after taking over as premier, including a boost to investment financed by issuing long-term government bonds. But they stopped short of unveiling any massive fiscal stimulus amid economic headwinds like a prolonged property slump.
"Achieving this year's targets will not be easy," Mr. Li said of the 5% growth objective as well as goals to create 12 million new urban jobs and raise household incomes.
The growth target exceeded projections by many economists who increasingly see China struggling to replicate the stellar expansion rates of decades past. The world's second-largest economy grew 3% in 2022 and 5.2% the following year as activity rebounded from the Covid overhang.
"The drag from the unavoidable structural decline in China's property sector has only just begun," said Mark Williams of Capital Economics. He warned weak construction demand "would shave another percentage point off China's average economic growth rate over the rest of this decade."
To offset such a drag and meet its roughly 5% goal, Beijing plans issues 1 trillion yuan ($139 billion) in special bonds this year to finance infrastructure and other key projects. Mr. Li said the steady stream of future bond issuances would fund "major national strategies" and security in key areas, as China invests in strengthening its military capabilities.
The central government budget released Tuesday calls for defense spending to rise 7.2% this year to 1.67 trillion yuan. That matched 2023's increase and would allow outlays on equipment, research and bolstering combat readiness even if real growth trails projections.
Separately, Mr. Li vowed to adopt a "new development model" for the ailing real-estate sector and construct more government-subsidized housing. That appeared to confirm reports Beijing will use public funds to acquire vacant apartments and convert them into affordable units, providing a demand boost.
Local governments sitting on high debt loads from years of deficit spending and falling land sales would also see support from the central government, said Finance Minister Liu Kun. He described local risks as "generally under control" while saying measures would be taken to further address the issue.
Underscoring consumer spending as another economic priority, Mr. Li said Beijing would roll out policies this year encouraging households to upgrade major purchases like home appliances and cars. The "worry-free consumption" efforts aim to catalyze fledgling demand as household incomes remain constrained.
He added that fiscal policy would remain "proactive" while monetary conditions stay "prudent," suggesting no shift in the overall macro policy stance even as growth sputters. Still, central bank chief Yi Gang said the PBOC had tools like reserve-ratio requirements to boost liquidity.
Unlike prior major stimulus efforts, officials avoided bold spending and hinted at more incremental, targeted steps aimed at addressing structural drags and risks. That reflected a sharper focus from Mr. Li's "pragmatic" government on issues like debt and demographics clouding the outlook.
"The reality is that all economic fundamentals are under pressure-weak consumption, struggling manufacturing and an inevitable slowdown in real estate and infrastructure investment," said Alicia Garcia Herrero of Natixis.
