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China's underwhelming 2023 economic growth target

China's growth target for 2023 underwhelmed investors, economists and analysts looking for clues about how President Xi Jinping's officials will run the world's second-largest economy.

Why it matters: The modest growth goals suggest China's economy may continue to weigh on global GDP this year, as the nation tries to put its COVID-related slowdown behind it.

Driving the news: During the weekend's opening of the largely ceremonial annual session of the National People's Congress — China's legislature — party officials set their target for 2023 GDP growth at "around 5%," and failed to introduce large stimulus plans as some had expected.

Background: In 2022, China fell far short of its target of 5.5% economic growth.

  • Hampered by the impact of the government's strict zero-COVID policies, its economy expanded by just 3% in 2022, its slowest rate of growth since 1976.

Between the lines: The news set off a slump in some China-sensitive commodities, suggesting investors had expected a stronger commitment from policymakers to use traditional tools like big spending on infrastructure projects to boost growth.

What they're saying: "The fact that policymakers missed the 'around 5.5%' growth target in 2022 might be one consideration behind the relatively unambitious growth target this year," Goldman Sachs analysts wrote.

  • "Non-boom China growth won’t be enough to keep the global economy from sliding into recession this year," Piper Sandler analysts wrote.
  • "The growth target suggests the authorities will not go hell-for-leather to boost the economy after a long period of weakness during the zero-COVID policy era," Capital Economics analysts wrote.

The big picture: How much China’s growth will slow in the coming years is a key question related to the direction of the country under the increasingly centralized leadership of President Xi — whose precedent-shattering tenure has been marked by a focus on restoring China to so-called great power status in the face of persistent economic headwinds.

  • This week's National People's Congress marks the departure of Premier Li Keqiang, a pro-market technocrat who was China's top economic official for the last decade.
  • Li Qiang, the former Communist party secretary of Shanghai best known for his close ties to Xi, is expected to succeed him. He's just one of a number of new faces Xi has put in charge of the economy.

The bottom line: China is in a period of flux, as geopolitical tensions with the West, domestic economic issues — like the struggling housing market — and declining demographics act as stiff headwinds to its economic recovery.

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