Politburo meeting: China’s leaders have remained silent on the country’s GDP targets

Politburo meeting: China’s leaders have remained silent on the country’s GDP targets

At the beginning of March, the Chinese government announced that the country was aiming for gross domestic product growth of around 5.5% this year. While that would be China’s lowest official target for economic growth in three decades, economists have said it appears increasingly impossible to achieve.

Now the country’s leadership is silent on growth targets altogether. At an important meeting of above No GDP targets were mentioned by government leaders on Thursday, and analysts have said it is a sign the government believes it may not be able to meet its targets after all.

Instead, the country will now “seek to achieve the best possible results,” according to a statement, after the Politburo – China’s top decision-making body – convened on Thursday to assess the latest state of the economy and set the political tone for the second half. The government will also focus on stabilizing employment and prices, the statement added.
The meeting was chaired by President Xi Jinping and attended by other members of the Politburo. The group of 25 top officials oversees the ruling Communist Party.
China's economy is growing at its slowest pace since early 2020

The tone of this meeting was in sharp contrast to the previous Politburo meeting in April, when policymakers pledged to “make efforts to meet economic and social goals” for this year.

“Given that China only grew 2.5% in the first half, the original was [annual] The target of around 5.5% is too high,” said Larry Hu, chief China economist at Macquarie Capital, in a report late Thursday.

“At today’s meeting, policymakers used the new phrase: ‘Strive for the best outcome.’ That means they no longer see 5.5% or even 5% as achievable this year,” he added.

Betty Wang, senior China economist at ANZ, also said on Friday that policymakers are “prepared to miss the growth target.”

No flexibility at zero Covid

Despite the slowing growth, the top leadership at the meeting did not propose any flexibility on the zero-Covid policy, which is a major drain on China’s economy.

Politics has a special “political meaning,” the Politburo statement said.

Analysts now assume that China will stick to its rigid Covid strategy until next year.

“The Politburo pledged to stick to the zero-Covid strategy and specifically mentioned for the first time that politics is a particularly important factor to consider when dealing with the relationship between Covid controls and socio-economic development,” Nomura said analysts in a report on Thursday.

Chinese President Xi Jinping (below) is applauded by members of the government as he arrives for the closing session of the Chinese People's Political Consultative Conference (CPPCC) at the Great Hall of the People in Beijing March 10, 2022.  China.  China's week-long annual policy gathering, known as the Two Sessions, brings together leaders and lawmakers to set the government's agenda for domestic economic and social development for the next year.

“This supports our view that Beijing will maintain the zero-Covid strategy at least until March 2023, when the current political restructuring is fully completed,” they added.

Nomura added that China is expected to grow 3.3% in 2022.

The Communist Party will undergo a leadership reshuffle at its 20th Congress this fall. President Xi Jinping is expected to seek a historic third term at the meeting. If successful, he would be re-elected as President at the March 2023 parliamentary session.

Real estate crisis and financial risks

However, policymakers on Thursday acknowledged the economy faces significant challenges and called for greater efforts to deal with the recent mortgage crisis.

In recent weeks, thousands of disgruntled homebuyers have threatened to stop making mortgage payments on unfinished homes if construction isn’t completed on time. The boycott came as a growing number of projects were delayed or stalled by a lack of money from developers.

“[We] must stabilize the real estate market”, the Politburo statement said.

It stressed that local governments should take responsibility to ensure pre-sold homes are completed and delivered to home buyers.

China is scrambling to defuse concerns over mortgage boycotts and bank runs

“In other words, it’s not very likely that the central government will set up a mega-fund to buy up the majority of unfinished projects,” Macquarie Capital’s Hu said.

The Politburo also discussed efforts to maintain the overall stability of the financial system, resolve risks related to local rural banks, and strictly combat financial crime.
Massive protests have erupted across central China in recent weeks as thousands of depositors were denied access to their savings at several rural banks in Henan and Anhui provinces. Following the protests, local authorities have agreed to start refunding some bank customers whose accounts have been frozen for months.

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