Less growth and more weapons. China announced its economic goals for 2022 and its defense budget during the annual lianghui, or “two sessions”: a week of meetings in which targets are communicated and laws are ratified. Premier Li Keqiang opened the meeting with his economic report, lowering the annual GDP growth target to 5.5%. Percentage lower than last year’s target (6%) but above the forecasts of the International Monetary Fund (4.8%). It is the lowest growth forecast since 1991, immediately after Tian’anmen and before the new impetus for reforms given the following year by Deng Xiaoping. Beijing is coming to terms with the slowdown in growth, a trend already clear in recent months. In 2021, growth was 8.1% but in the last quarter it slowed down to 4% due to several factors: the real estate crisis, the energy crisis and Xi Jinping’s rectification campaign that hit big techs.
In 2022 the challenges multiply. The zero Covid strategy continues to affect consumption, but Beijing is not willing to abandon it until 2023, given the crucial appointment with the 20th Party Congress next autumn, when Xi Jinping expects the conferment of the third term. The consequences of the war in Ukraine should also be considered, which on the one hand can make Russia more dependent on China, but on the other hand risks hitting Beijing in its ties with the West and with rising gas and oil prices. Li did not hide the fact that the external scenario is “volatile” and “severe” and referred to a “triple pressure”: shrinking demand, supply problems and weakening expectations. But there are signs of confidence: the budget deficit has been set at 2.8%, below the red line of 3%, and the creation of over 11 million new jobs has been promised.
The key word, even more than usual, is “stability”. In line with Xi’s rhetoric of common prosperity, which heralds more massive intervention by the state in the economy. Including the real estate sector. The president often refers to the “three great mountains” that divide the Chinese people from prosperity: health, education and housing. With the first two already dominated by the state, the last piece is missing, which is placed in a progressive way as in the unpacking in stages of the colossus Evergrande. Objective: to block the “disorderly” expansion of capital.
In the next few days, the official lifting of restrictions on family planning is expected, after the last ten-year census has triggered the demographic alarm. Meanwhile, military spending rose: + 7.1% compared to last year with a slight increase in the speed of growth (in the previous two years it was 6.6% and 6.8%). Reached the peak of $ 230 billion. Numbers still far from those of the USA but which demonstrate the will of the new helmsman Xi to sail with force the stormy waters of the year of his third coronation.