China drops economic growth target to lowest level in decades as it tries to reverse slump

China dropped its annual economic growth target to the lowest level in decades on Saturday, as the country tries to recover from a slump that coincides with the Russia-Ukraine war, which is driving up oil prices and disrupting the global economy. Premier Li Keqiang, the country's No. 2 leader, said in a report to the country's ceremonial legislature that the ruling Communist Party will aim for about 5.5% growth this year, down from last year's 8.1% development. It acknowledged that commodity prices are rising, but it made no mention of the cause

Li during a 55-minute speech at the National People's Congress opening in Beijing's Great Hall of People, stated, "Achieving this goal will require arduous efforts."

Increasing energy prices as a result of the conflict, combined with anti-coronavirus measures and a crackdown on debt in China's enormous real estate industry, caused economic growth to plummet to 4% in the fourth quarter of 2021, compared to 5% a year earlier. The International Monetary Fund and private sector analysts expect GDP to be as low as 4.3% this year.

Zero tolerance strategy hampering manufacturing and export

Moreover, manufacturing has been hampered by the COVID-19 "zero tolerance" strategy, which has halted access to several major cities at times, as well as sluggish demand for Chinese exports and power and processing chip shortages. Beijing's anti-virus approach, which has helped keep infection levels low but at a mounting expense, is not likely to be relaxed, according to the premier.

The government of President Xi Jinping has attempted to distance itself from Putin's war by calling for dialogue but has refused to condemn the attack. Beijing has slammed trade and financial penalties against Moscow, claiming that the United States is to fault for the dispute. Tighter regulations on financing by real estate developers initiated the downturn, which resulted in a drop in building and property sales.

In December, the ruling party announced a "policy pivot" toward bolstering growth and away from longer-term efforts targeted at reducing debt and carbon emissions. Also on Saturday, the government announced a 7.1% increase in the military budget, compared to a 6.8% increase the previous year. China, behind the United States, has the world's second-largest military budget and is investing in long-range, nuclear-capable missiles and other weapons to expand its dominance beyond its borders.

(With inputs from agencies)

Image: AP/Pixabay