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China sets economic targets for 2024

For yet another year, China has issued what amounts to a wish list of economic targets for the economy in 2024.

The most laughable of the targets is a 3% goal for Consumer Price Inflation (CPI) for this year. This target seems ambitious considering the country experienced consumer price deflation in January, following an average of just 0.2% for 2023 as the economy slumped into months of falling prices.

Three per cent inflation was last briefly reported in mid-2020 as prices were coming down from the pandemic-driven surge to just over 4% earlier that year.

January saw China’s consumer prices fall by an annual 0.8%, the most in more than 14 years and worse than market forecasts of a 0.5% fall. It was the fourth straight month of decline in CPI, the longest streak of drop since October 2009.

China has experienced CPI deflation for four months now and, before that, more than a year of price disinflation, while producer prices across manufacturing have been negative for more than a year.

The reality is that instead of the Chinese Communist Party-run government having an inflation target, it should really have some sort of policy or target for turning the current weakness in prices into something more sustainable. The only way to do that is to tackle the property crisis and give consumers more confidence to spend.

Another laughable target was the GDP growth figure of “about 5%” for this year, following the 5.2% figure reported for 2023. That figure was widely suspected of having been “arrived at” by the government rather than reflecting what happened in the year, especially in the final quarter when demand slowed and prices dropped (led by falling port prices).

In fact, the biggest hope for ending deflation in China at the moment is from a rise in port prices over the next few months, not any of the projected policies or ideas of economic security.

The inflation and GDP growth targets were released Tuesday morning in the government work report presented to the first session of the National People’s Congress, China’s rubber-stamp parliament.

China has already announced it will allow the government deficit to rise this year, acknowledging that the economy needs more spending and not a single one-off stimulus like the $587 billion package announced in November 2008, as the GFC erupted.

China also forecasts a 5.5% unemployment rate for 2024 for cities, with the creation of around 12 million new urban jobs. With the jobless rate in the cities reported at 5.1% at the end of 2023, this year’s target implies a small rise in unemployment.

Remember that the government halted the reporting of the youth unemployment rate when it reached record highs in successive months in the middle of last year and started attracting a lot of attention.

To report that figure now would be a breach of the country’s very tough espionage and spying laws, as it is a so-called state secret, and the leaker and those who report it could be punished.

The People’s Congress is about to rubber-stamp a move by President Xi Jinping to extend that hardline law to what the government calls “work secrets.” It is an opaque definition that foreign businesses are starting to understand could damage their Chinese operations and the futures of executives and staff.

Western media reports said the government’s work report emphasized the need to “ensure both high-quality development and greater security,” preventing risks, and maintaining social stability, among other tasks.

It called for implementing the decisions and plans of the Communist Party of China’s Central Committee (there is no alternative).

China’s economic policies for the year ahead are typically discussed by top party leaders in December. Local governments hold their own meetings to set regional growth targets before the National People’s Congress announces the goal for the entire country.

Beijing, in recent years, has downplayed the number in favor of what it calls “high-quality” growth.

The work report said that “internal drivers of development are being built up,” but added the country should be “well prepared for all risks and challenges.”