China’s leaders take a cautious approach to the estimate for the country’s economic recovery, after removing most of the Covid restrictions on business activity that were imposed in 2022.
China announced a target of around 5% Gross Domestic Product (GDP) growth for 2023, with only a slight increase in fiscal support.
The vice president and senior credit officer of Moody’s Investors Service Martin Petch said in a note, “The government’s conservative growth target of 5% for 2023 recognizes that the pickup in China’s growth continues to face headwinds. These include the impact of slower global growth on China’s exports and risks associated with the property sector and local government debt.”
Petch added, “The government’s only mild expansion in fiscal support and more targeted monetary measures indicate that long-term issues including constraining leverage and financial stability remain important elements of the long-term policy mix.”
The National Development and Reform Commission (NDRC) reported, “There are still quite a few factors restraining the recovery and growth of consumption. Resuming growth in real estate investment is an uphill battle. Some local governments are finding economic recovery difficult and are facing prominent fiscal imbalances. Debt risks from local governments’ financing platforms need to be addressed immediately.”