2024 Government Work Report sets out China’s economic priorities

China’s Premier Li Qiang has unveiled the 2024 Government Work Report (2024 GWR), setting out an array of economic and development goals for the country to pursue over the coming year.

It includes a GDP growth target of 5%, and outlines preferential tax policies and industry priorities, as well as measures to boost domestic consumption, attract foreign investment and mitigate financial risks.

It also outlines other targets including:

• keeping the urban unemployment rate to around 5.5%.
• keeping consumer prices increase to around 3%.
• continuing and expanding current tax and fee incentives.
• lifting all restrictions on foreign investment access in the manufacturing sector.

According to the China Briefing website, boosting domestic consumption has been a key concern for the government since the start of the pandemic. It said: “Although consumption experienced a major rebound in 2023 following the lifting of Covid-19 restrictions, overall recovery has been uneven. Retail sales of consumer goods grew by a healthy 7.2% from 2022. However, this increase can be partly attributed to the low base effect from 2022, when consumption plummeted due to Covid-19 restrictions.

“Meanwhile, the Consumer Price Index (CPI) rose by just 0.2% year-on-year, and imports fell by 0.3% year-on-year due to weak domestic demand.

“To address these issues, the 2024 GWR calls for promoting ‘stable consumption growth’. While it does not outline specific policies, it proposes various mechanisms to increase purchasing potential, such as measures to increase income, optimizing supply, and reducing restrictive measures.”

It added that boosting foreign capital was high on the policy agenda in 2023. It said: “The government introduced measures to improve the business environment for foreign companies, such as proposing measures to ease cross-border data flows and relaxing rules for on-arrival business visas.

“The 2024 GWR expands upon these initiatives, outlining specific measures to attract foreign investment. These include continuing to shorten the negative list for foreign investment access, which lists the industries that are restricted from foreign investment. The 2024 GWR specifically calls for completely removing market access restrictions in manufacturing fields and relaxing market access for telecommunications, medical and other service industries.”

On top of that, China plans to promote the development of a modern industrial system by:

• promoting the upgrading of industrial and supply chains.
• fostering emerging and future industries.
• promoting the innovative development of the digital economy.

 

Economists back government’s optimism

Meanwhile, leading economists say they believe the government can achieve its GDP growth target, praising the potential of China’s economy.

Despite challenges stemming from weakening external demand and mounting uncertainties, they expressed optimism regarding China’s capacity to achieve its annual GDP growth target of around 5%, citing fiscal and monetary measures aimed at stimulating domestic demand.

Justin Yifu Lin, Dean of Peking University’s Institute of New Structural Economics, said the annual growth target is achievable if the government steps up both fiscal and monetary policies to stimulate consumption and investment.

Dismissing speculation that China’s economy has reached its peak, he said China enjoys favourable advantages and conditions to maintain sustained growth, including its ultra-large domestic market, a complete industrial system, huge investment in industrial upgrading and its booming digital economy.

“China’s role in the global economy is substantial, as it accounts for around 18 percent of the world economy,” Lin said. “The nation’s anticipated growth rate of around 5% is poised to contribute one percentage point to global economic expansion, contributing approximately 30% of global economic growth, solidifying China’s position as the primary driver of global economic advancement.”

And Luo Zhiheng, chief economist at Yuekai Securities, also said he was optimistic about China’s economic prospects, saying the country still enjoys ample room and sufficient policy tools to bolster the economy.

He said this year’s support for the economy could come from infrastructure spending and a new round of large-scale equipment renewal, adding that the country needs to strengthen both fiscal and monetary policies to support the spending.