China: Disappointment after a humble GDP growth target – UOB

UOB Group’s Head of Research Suan Teck Kin and Economist Ho Woei Chen review the latest decision by the Chinese government regarding the growth target.

Key Takeaways

“China maintained that economic stability is its priority. The government has set a GDP growth target of “around 5.0%” for 2023, the lowest annual growth target on record. This is at the lower end of market’s expectation but in line with our estimate.”

“Despite a modest growth target, China has set a higher urban employment creation goal of 12 mn this year compared to 11 mn in 2022. The target for urban surveyed jobless rate is set similar to the two preceding years at around 5.5%. In our view, the unemployment rate may be a better indicator for the labour market given the employment creation does not account for job losses.”

“By setting a lower growth target, this likely implies less pressure on the officials to expand the monetary and fiscal support this year. But with China moving to Covid endemicity and less resources to be spent on testing and virus containment, we believe the effectiveness of its fiscal and monetary policy will be improved despite not announcing a more expansionary policy.”

“Key developments to watch ahead will include the reform of the party and state institutions and the key personnel appointments on 10-12 Mar including President (10 Mar), Premier (11 Mar), State Council Vice Premiers, Ministers, PBOC Governor (12 Mar) before the NPC draws to a close on 13 Mar.”