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China’s government set its lowest economic growth target in more than 30 years, a sign the housing slump, stringent Covid controls and global risks will continue to curb demand.

Beijing will target gross domestic product growth of around 5.5% this year, according to a prepared speech by Premier Li Keqiang at the opening of the National People’s Congress. Most economists surveyed by Bloomberg predicted the government would set a range of 5%-5.5%. 

Policy makers are aiming to narrow the budget deficit to 2.8% of GDP this year from last year’s target of around 3.2%. They’re also aiming to add more than 11 million urban jobs in 2022, keeping the unemployment rate under 5.5% and inflation at around 3%.

The economy began weakening in the latter part of last year, weighed down by a housing market slump, repeated Covid-19 outbreaks and weak consumer spending. The outlook has deteriorated this year with a spike in geopolitical tensions as Russia’s invasion of Ukraine roils financial markets and stokes commodity prices.

“Our country will encounter many more risks and challenges, and we must keep pushing to overcome them," Li said in the report. “There is no doubt but that China’s economy will withstand any downward pressure and continue growing steadily long into the future."

Other highlights of the government’s report:

  • A total of 3.65 trillion yuan ($578 billion) in new special local government bonds will be sold this year, the same as last year
  • Government reiterates it will keep the macro leverage ratio stable
  • Vows to “step up implementation of the prudent monetary policy"
  • Pledges to stabilize land, home prices
  • Reiterates to keep yuan stable
  • Government to set up a fund to ensure financial stability

Shoring up growth is of political significance to the Communist Party and President Xi Jinping, who is expected to make an unprecedented bid to stay on as leader for a third term at a key party meeting later this year. Officials have highlighted economic stability as a top priority this year and urged faster spending from local governments to bolster the economy. 

A target of 5.5% would require “more accommodative" macro policies, JPMorgan Chase & Co. economists led by Zhu Haibin said ahead of the NPC. 

The central bank has already cut interest rates this year and vowed to keep policy flexible and responsive to changing economic conditions. Banks in several cities have also been easing mortgage rates. 

The government hasn’t set a GDP target under 6% since 1991. No target was set in 2020, when the pandemic caused growth to slow to 2.2%. The economy expanded 8.1% last year. 

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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