China’s two sessions: China increases defense spending by 7.2% and sets economic growth target of “around 5%” for 2023

Hong Kong (CNN) China has set an official economic growth target of “around 5%” for 2023 as it tries to revive the world’s second-largest economy after a year of sluggish growth amid pandemic measures.

The new GDP target was released by outgoing Premier Li Keqiang on Sunday during the opening of the annual session of the National People’s Congress (NPC), the country’s legislative body, when Li presented the government’s work report to nearly 3,000 delegates in Beijing’s Great Hall handed over to the people.

“China’s economy is enjoying a steady recovery and is demonstrating tremendous potential and momentum for further growth,” Li said in his address, which emphasized China’s focus on ensuring stable growth, jobs and prices amid global inflation.

The economy added more than 12 million urban jobs last year, according to the jobs report, with the urban unemployment rate falling to 5.5%.

China also unveiled its annual military budget for 2023, which will increase by 7.2% to about 1.55 trillion yuan ($224 billion), according to a draft budget released along with the opening of the National People’s Congress.

The spending surge marks the second straight year that annual military spending growth has exceeded 7%, beating last year’s growth of 7.1% amid rising geopolitical tensions and a regional arms race. As in previous years, the number remains well below the symbolic double-digit expansion.

“The armed forces should step up military training and readiness across the board, develop new military strategic guidelines, devote more energy to training in combat conditions, and make well-coordinated efforts to strengthen military work in all directions and areas,” Lis said work report.

The GDP target and military spending are among the most closely watched on opening day, with the GDP target figure in particular being monitored this year as China moves out of its economically exhausting zero-Covid policy. The new figure appears modest compared to what some analysts had forecast as a more robust target for the coming year.

The NPC meeting is a major annual political event that coincides with a meeting of China’s top political advisory body, the events collectively known as the Two Sessions.

These are the first two sessions since Chinese leader Xi Jinping secured a norm-breaking third term at the top of the Chinese Communist Party hierarchy in October. Xi will enter his third term as president during Congress, a largely ceremonial title.

Chinese Premier Li Keqiang speaks during the opening session of China’s National People’s Congress (NPC) at the Great Hall of the People in Beijing on Sunday, March 5.

economic recovery

China’s GDP grew by just 3% in 2022, falling well short of the official target of “around 5.5%”, largely due to ongoing Covid restrictions. It was the second-lowest annual growth rate since 1976, only behind 2020 – when the first Covid outbreaks nearly paralyzed the economy.

In December, after the Communist Party abruptly ended its zero-Covid policy, a massive wave of infections swept the country, throwing supply chains and factories into chaos. But the disruptions began to fade in January, and the economic recovery picked up steam last month.

Official data released on Wednesday showed China’s factories had their best month in almost 11 years in February, underscoring how quickly economic activity has recovered after the end of the Covid outbreak wave. The service and construction sectors also showed their best performance in two years.

Moody’s Investors Service has since raised its growth forecast for China to 5% for both 2023 and 2024, up from 4% previously, citing a stronger-than-expected recovery near-term.

Analysts had predicted a difficult recovery path for China amid global headwinds, perhaps reflected in the conservative 2023 target announced on Sunday.

The global economy will weaken further this year as rising interest rates and Russia’s war in Ukraine continue to weigh on economic activity, the International Monetary Fund estimated in January. Global growth is expected to slow to 2.9% in 2023 from 3.4% in 2022.

China is due to release its import and export data for the first two months of this year on Tuesday, which will provide an insight into global trade demand.

During the congress, the ruling Communist Party’s new economic team will be unveiled, including various ministers and chief financial officers, and other key appointments – already selected by the Communist Party leadership – will also be approved. Premier Li’s successor will be formally appointed during the meeting, which lasts until March 13.

The new economics team will take on the difficult task of reviving China’s economy as it confronts a growing array of challenges, including sluggish consumption, rising unemployment, a historic downturn in the real estate sector and rising tensions with the United States over tech sanctions.

military spending

The 7.2% increase in planned defense spending marks the first time in the past decade that the budget growth rate has risen for three consecutive years as Beijing continues to modernize and build its military while putting pressure on Taiwan — the self-governing government The Chinese Communist Party claims island democracy for itself, although it has never ruled.

China now controls the world’s largest navy by size and continues to expand its fleet of nuclear submarines and stealth fighter jets.

The military budget grew 7.1% to 1.45 trillion yuan in 2022, compared with 6.8% a year earlier. The last year China’s annual defense spending grew by double-digit percentages was 2015.

Chinese officials have repeatedly attempted to portray their military spending as reasonable compared to other countries like the United States — part of China’s bid to present itself as a peaceful power despite its aggression in the region, including its militarization of the South China Sea and its heavyweights patrol in Taiwan.

During a press conference on Saturday before opening day, NPC spokesman Wang Chao said China’s defense budget is growing at a “relatively moderate and reasonable rate.”

“China’s defense spending as a percentage of GDP has remained stable over the years. They remain essentially stable and below the world average,” Wang said.