China outlines plan to stabilize economy in crucial year for Xi Jinping

China has shed global fears over the war in Ukraine and set its economy on a trajectory of steady expansion for 2022, with growth, job creation and an increase in social welfare in a year in which national leader Xi Jinping is willing to make a claim, have priority new term.

The annual government work report that Premier Li Keqiang presented to China’s National People’s Congress on Saturday made no mention of Russia’s invasion of Ukraine and suggested China’s economic prospects with relentless evenness.

The implicit message seemed to be that China could weather the turmoil in Europe and would focus on keeping the Chinese people content and occupied ahead of an all-important Communist Party meeting in the fall, when Mr Xi is increasingly certain of his tenure extend.

“In our work this year, we must make economic stability our top priority and pursue progress while ensuring stability,” Mr. Li said.

By announcing a growth target for China’s economy this year of “around 5.5 percent,” Mr. Li reiterated the government’s emphasis on supporting growth amid global uncertainty from the pandemic and the war in Ukraine. That target is slower than the 8.1 percent recovery in the economy that China reported last year, but higher than many economists believe the country can achieve without large government spending programs.

Mr. Li disappointed everyone who thought he had something to say about Ukraine. The Chinese government’s annual work reports generally avoid new foreign policy announcements, and this year’s was no exception. Beijing has sought to maintain its partnership with Russia while trying to distance China from President Vladimir V Putin’s decision to go to war.

“China will continue to pursue an independent foreign policy of peace, stay on the path of peaceful development, and strive for a new kind of international relations,” Mr. Li said in his report, the closest he could come to commenting on international developments.

Nevertheless, the leaders in Beijing also signaled – in numbers rather than words – that they were preparing for an increasingly dangerous world. China’s military budget will grow 7.1 percent this year to about $229 billion, according to the government budget report also released on Saturday. Mr. Li pointed out that China’s efforts to modernize and overhaul its military, including expanding the navy and developing a series of advanced missiles, would not let up.

“While economic development provides a basis for a possible increase in the defense budget, the security threats facing China and the calls for improvements in national defense capabilities caused by those threats are the driving factors,” said the Global Times, one of the Communist Party-run newspaper reported this week that predicted China’s increase in military spending. “Over the past year, the US has also rallied its allies and partners around the world to militarily provoke and confront China.”

In December, the United States Congress approved a $768 billion budget for the US military. But salaries and equipment manufacturing costs are far higher in the United States, leading some analysts to believe China’s military budget is fast catching up in terms of actual purchasing power.

The plan outlined by Mr. Li suggests that China values ​​economic growth more than trying to make potentially painful adjustments to shift the economy toward greater reliance on domestic consumer spending. Beijing has attempted to shift the economy away from reliance on debt-fuelled infrastructure and housing, with limited success.

China managed to slightly reduce its debt in relation to economic output last year. This was necessary because in the first year of the pandemic, that ratio had risen to levels that economists considered unsustainable.

But meeting this year’s growth target would require more borrowing, undoing most or all of the progress made last year in reducing the debt burden, said Michael Pettis, an economist at Peking University. He said it’s hard to see how China could break its reliance on hitting high growth targets, at least in part, through heavy borrowing.

Acknowledging that the Chinese economy will face challenges this year, Mr Li pointed to the sluggish recovery in consumption and investment, slowing export growth and a shortage of resources and raw materials. In the last three months of last year, the economy grew by just 4 percent.

Part of this economic slowdown reflected a series of government policy changes aimed at curbing unsustainable expansion in some sectors. Housing speculation was discouraged. Strict limits have been imposed on the after-school tutoring industry. And national security agencies imposed tighter scrutiny on the technology sector.

China’s massive construction industry is faltering as home buyers grow wary and developers start defaulting on debt. Dwindling revenue from land sales has made some local governments more cautious about building additional roads and bridges. Ongoing lockdowns and travel restrictions to prevent the spread of the coronavirus epidemic have led to a drop in hotel and restaurant spending.

Mr. Li gave few indications as to whether China might deviate from its strict “zero-Covid” pandemic strategy, which relied on mass testing and occasional lockdowns. He urged officials to deal with local outbreaks “scientifically and purposefully.”