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Chinese Premier Li Qiang speaks during the opening of the second session of the 14th National People’s Congress in Beijing, March 5, 2024. Lingtao Zhang—Getty Images
The story of China’s economy last year was one of uncertainty and lack of confidence. The country is still in the midst of a wealth crisis, and consumers are not able to spend as freely as they used to.
But despite the hopeless situation, the Chinese government is targeting growth of “about 5%” this year, Premier Li Qiang said during the “Second Session,” a key event on China’s political calendar announcing the country’s economic policy. It was announced as part of a speech. 1 year.
Li said on Tuesday that China aims to create 12 million jobs in urban areas, keep the unemployment rate at 5.5% and set a consumer inflation target of 3%. The government also plans to issue about 1 trillion yuan ($138.9 billion) of “very long-term” special bonds to finance major projects in line with China’s strategic priorities.
However, Li also acknowledged the uncertainty plaguing China’s economy.
“The foundations for China’s sustained economic recovery and growth are not solid enough,” Li said.
Home prices continue to fall despite government support, and China is still grappling with a long-standing real estate crisis. According to Bloomberg Economics, a 5% decline in home prices would wipe out 19 trillion yuan ($2.6 trillion) in housing equity.
Analysts at HSBC said that although Lee’s speech emphasized reducing risks and promoting healthy long-term growth, it did not include “concrete steps to stabilize the property market.” I wrote that there was no.
China also faces the threat of deflation. Consumer prices fell 0.8% in January, the fastest level in more than 14 years.
Top analysts had expected the Chinese government to set a 5% growth target. But they still call the goal ambitious, citing problems still plaguing China’s economy. Larry Hu says 2024 growth target will be ‘much harder to achieve’ as comparison standards will be higher, Macquarie’s chief China economist said in a research note on Tuesday.
China reported growth of 5.2% in 2023, which was relatively low compared to the base as strict zero-COVID-19 policies in 2022 suppressed the country’s economy.
“You shouldn’t invest in China”
As China tries to project confidence amid economic troubles, foreign investors may already have given up on the country’s economy.
Sharmin Mossabah Rahmani, Goldman Sachs’ chief investment officer, said in an interview on Bloomberg TV aired Monday ahead of two sessions that investors are looking for cheap Chinese stocks that have been hurt by a prolonged market downturn. said he should not be attracted to it. “You shouldn’t invest in China,” she warned.
Taking a bearish view, Mossavar Rahmani pointed to three weaknesses, particularly real estate, infrastructure and exports. He also blamed opaque policy decisions and patchy economic data.
A surprising policy change is hitting China’s private sector. For example, regulators announced tough draft regulations for the video game industry in late December, Gaming stocks are worth $80 billion. The new rules surprised many analysts who had felt that the Chinese government’s crackdown on the industry was over. To further obscure the issue, the regulator later removed the draft rules from its website.
“Policy uncertainty generally puts a bit of a cap on stock markets,” Mossavar Rahmani said.
Mossavar Rahmani said he was not satisfied with China’s growth rate of 5.2% in 2023, which is similar to the rate targeted by the Chinese government this year. “Most people think this is not the real growth rate; it was actually much weaker,” she says.
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