China sets 5% growth target for 2023.

Reuters -  China set a modest target for economic growth this year of around 5% on Sunday, as it kicked off the annual session of its National People's Congress (NPC), which is poised to implement the biggest government overhaul in a decade.

 The economy had one of its weakest performances in decades last year, with Gross Domestic Product (GDP) growing by just 3%, pressured by three years of COVID controls, a crisis in the vast real estate sector, and a crackdown on private enterprise.

 In his work report, outgoing Premier Li Keqiang emphasized the need for economic stability and consumption expansion, setting a target of creating around 12 million urban jobs this year, up from last year's target of at least 11 million, and warned that risks remain in the real estate sector.

 Li set a budget deficit target of 3,0% of GDP, expanding from a target of around 2,8% last year.

  "At home, the foundation for stable growth needs to be consolidated, insufficient demand remains a pronounced problem, and the expectations of private investors and companies are unstable," he said.

 This year's growth target is at the lower end of expectations, with monetary policy sources recently telling Reuters that a range as low as 6% could be set. It is also below last year's target of around 5,5%.

 Alfredo Montufar-Helu, head of the China Center at the Conference Board in Beijing, said that setting a higher growth target would require massive stimulus and "exacerbate the structural imbalances that China is trying to address to achieve its long-term development goals."

 The lower target is more achievable, he said, and "recognizes that the Chinese economy will be dealing with significant economic headwinds this year."

 China's state planner said it aims to increase the income of the lowest earners and bring more people into the middle-income bracket. The planner announced measures to stimulate consumption, but stopped short of direct spending, such as cash handouts.

 To boost growth, the government plans to stick to its infrastructure spending playbook, increasing funding for high-value projects with 3,8 trillion yuan ($550 billion) in special local government bonds, up from 3,65 trillion yuan last year.

 Li, 67, and a list of more reform-oriented political figures are expected to retire during the congress, paving the way for supporters of President Xi Jinping, who further consolidated his power by securing an unprecedented third leadership term at the Communist Party Congress in October.

 During the NPC, former Shanghai party chief Li Qiang, 63, a longtime ally of Xi, is expected to be confirmed as prime minister, tasked with revitalizing the world's second-largest economy.

 Parliament will also discuss Xi's plans for an "intensive" and "broad" reorganization of state entities and the Communist Party, state media reported on Tuesday, with analysts expecting a deepening of the Communist Party's penetration into state organs.

 "Global inflation remains high, global economic and trade growth is losing momentum, and external attempts to suppress and contain China are increasing," Li said during his opening speech to parliament, which will continue until March 13.