Premier Li Qiang has declared China’s ambition for 5% economic growth in 2022. During a key session at the National People’s Congress, Li acknowledged several unresolved challenges facing China’s slowing economy.
China is grappling with the task of revitalizing its former robust economy. According to Li, there are acute dangers and risks in sectors like real estate, local government loans, and small to medium-sized financiers. Formulating policies under these conditions presents substantial obstacles.
In response to the pandemic-induced economic slowdown, China has announced new measures to manage the struggling real estate sector and aims to create 12 million new urban jobs. The country is also pivoting towards research and development, planning heavy investments in promising industries like artificial intelligence and semiconductors.
Apart from these economic strategies, China also highlighted its sturdy commitment to environmental sustainability, pledging to achieve carbon neutrality by 2060. Foreign investment will be encouraged, existing tax laws adjusted, and financial market regulations reinforced, all in an attempt to create a conducive business environment.
7.2% increase in defense expenditure was also revealed, a figure that is being closely observed by neighbouring countries and the US due to ongoing tension over Taiwan. Additionally, China is broadening its research efforts in advanced technologies, including artificial intelligence and life sciences.
Despite witnessing unprecedented average yearly GDP growth of around 10% in the past, last year saw just a 5.2% rise, a figure debated by critics who suggest the actual rate may be lower.
The nation is also battling significant challenges such as high youth unemployment, volatile real estate and stock markets, potential deflation threat, commercial and geopolitical conflicts, decreasing birth rate, and an aging populace. All these factors contribute to the uncertainty of China’s sustainable growth prospects.
The crisis in the real estate sector, which accounts for nearly 20% of the economy, is a critical challenge. Demographic changes such as a declining birth rate and a rapidly ageing population could lead to workforce shortage, further complicating the economic situation.
Concerns around dropping consumer prices or deflation are also emerging. China’s consumer prices experienced a significant fall in January, marking a four-month consecutive decline. This situation can deter consumers from making major purchases and heavily burden those in debt, as prices and incomes drop while debts remain unchanged.
In conclusion, while China is facing numerous challenges, it also has the resources to navigate these difficulties with strategic planning, policy adjustments, and efficient crisis management.
