Smooth Sailing

China has set its GDP growth target for this year at some 5.5 percent, according to the government work report delivered by Premier Li Keqiang at this year’s National People’s Congress session. The sharp decline from last year’s 8.1 growth rate does not stem from economic quandaries, but reflects the Central Government’s intention to keep the country’s economic growth stable and sound.

The COVID-19 pandemic has dealt a heavy blow to the global economy, China’s included, but the latter managed to rebound soon after the short-term downturn was reversed by effective anti-COVID-19 measures, hitting an 8.1-percent growth rate in 2021, much higher than the 6-percent goal stated in last year’s government work report.

The 8.1-percent growth rate is obviously a bit too high, and hard to sustain, as too strong momentum may decrease the stamina that supports the overall recovery process. Moreover, a high growth target on top of an already high base might result in economic bubbles. A relatively low target, instead, better facilitates stable economic growth. It is also a reasonable goal given this year’s tasks of advancing employment, further improving the people’s livelihood, bolstering risk prevention and control, as well as progressing carbon neutrality efforts.

China finds itself at a critical stage of shifting to high-quality economic growth following many years of a high-speed growth focus. How to realize high-quality growth while maintaining a moderate pace is key right now and heavily relies on economic restructuring.

China’s GDP growth for 2019 was 6.1 percent, whereas for 2020 and 2021, the two years plagued by the COVID-19 outbreak, their combined average rate stood at 5.1 percent. Compared with the rest of the world, 5.5 percent is by no means a low target, but it’s the highest among major world economies.

China’s GDP for 2021 stood at 114.4 trillion yuan ($18 trillion), so a 5.5-percent growth on this basis equals 9 trillion yuan ($1.4 trillion), approaching a whole year’s economic aggregate for economies ranking 11th or 12th on the global economic growth list.

Yet some have voiced their concerns that a 5.5-percent target is one too high to hit, and several international financial institutions, including the World Bank, have put it between 4 and 5 percent. Their reasons are that in 2021, China’s economic growth witnessed a slip with each quarter and this year the international situation is further complicated by the Russia-Ukraine war.

Despite the deteriorating global environment, China’s foreign trade is not subject to worsening conditions, in that the country’s economic and trade ties with Southeast Asia, countries along the Belt and Road, the European Union and the United States will remain intact and China’s status in the global supply chain will not change. Domestically, the dynamic zero-COVID-19 policy and high vaccination rates will only help tame the pandemic more effectively, in turn strengthening economic recovery and growth.

In 2021, China’s economic growth was primarily driven by consumption, imports and exports and investments, with consumption accounting for 65.4 percent, imports and exports for 20.9 percent and investments for 13.7 percent. In this way, the 2022 growth rate might be a bit higher than the stipulated 5.5-percent target. The only uncertainty is how much investments will contribute to this year’s economic progress.

The Chinese Government has deliberately slowed down the pace of economic growth, as pointed out in the government work report, which has signaled that this year’s fiscal deficit will remain around 2.8 percent, much lower than last year’s 3.2 percent. Meanwhile, government spending and bank loans will lean more toward livelihood projects. All these reflect the authorities’ proactive efforts to realize a moderate growth rate, bringing the 5.5 percent target well within reach.