China has just closed its annual parliamentary session. Leaders in Beijing have vowed to tackle unemployment and the property crisis. Christian Saint-Etienne explains how the government’s ambitious growth prospects will clash with the real situation of the world’s second largest economy.
At the annual session of China’s parliament in early March 2024, the Chinese Communist Party’s economic officials set a 5% growth target for their country’s economy for the year 2024. Premier Li Qiang, in his first working report to the National People’s Congress, said that despite internal deflation and the real estate crisis, this goal seems achievable in a context where China continues to sharply increase its military budget, finance the expansion of its microprocessor production and the development of artificial intelligence applications.
Optimism of the authorities
To accelerate the recovery and development of its sovereign sectors, China will lower tariffs on imports of certain technology products while continuing to reduce the influence of US technology companies on its territory.
Observers were surprised by the cancellation of the prime minister’s traditional press conference during the session of the People’s Assembly. Li Qiang has been reduced to the role of a simple collaborator of Xi Jinping, who concentrates all power more than ever in his own hands.
However, in its latest forecasts for 2024, the International Monetary Fund is less optimistic than the Chinese authorities about future growth, anticipating growth of 4.6% in 2024 and 4.1% in 2025. The real estate sector, which directly and indirectly accounts for nearly 30% of the Chinese economy, remains weighed down by the crisis of major Chinese developers, who are still unable to meet their debt deadlines despite occasional aid from the government, which is reluctant to initiate a restructuring of the sector. Youth unemployment remains above 20%, contributing to the erosion of Chinese trust in their authorities. The Shanghai and Shenzhen stock exchanges continue to underperform those of the United States and Europe in 2024 after a disappointing performance in 2023.
But China’s economy continues to weigh heavily, with a GDP five times higher than India’s, an unrivalled industrial power and the boom in its exports in electric cars, heat pumps and photovoltaic panels.
A destabilizing factor
The central question remains that of the direction of the country’s general policy with the takeover of the tech sector symbolized by the fall of Jack Ma, the return of Communist Party cells in private sector companies including foreign companies and the unexplained disappearance of Chinese private sector leaders. As a result, long-term capital inflows have fallen sharply to India in 2023.
China has thus become a destabilizing factor in international relations with its desire to take control of the South China Sea, the multiplication of incidents between Chinese ‘fishing boats’ and the Philippine navy, and the accentuation of its policy of subsidies, contrary to WTO rules, to export sectors.