Beijing picks least bad option for growth target

As expected, China has set its 2024 GDP growth target at “around 5%.”

• That’s right in line with reported growth for 2023, which clocked in at 5.2%.
• It’s also right in the middle of market expectations, which ranged from 4.5-5.5%.

Getting to 5% will be no easy task.

• Unlike in 2023, base effects will not be in China’s favor – and recent economic data shows an economy that is still struggling.
• Most economists think 4.5% growth is more likely – for example the IMF expects a 4.6% expansion (IMF).

Get smart: Policymakers are in a pickle. They don’t want to set unrealistic goals.

• Failure to reach the target would undermine confidence in the government.
• And pushing to hit an unrealistic target would exacerbate structural issues like high local government debt and poor asset quality in the banking sector.

But at the same time, policymakers need to project confidence.

• Setting a low growth target would unnerve companies, households, and investors.
• If leaders can’t excite animal spirits, getting the economy out of its funk will be that much harder.

Our take: Policymakers didn’t really have a good option here. “Around 5%” was the right choice and the best of a bunch of lousy options.

• It shows that officials are focused on growth, but aren’t going for the absolute top of the range.