China Boosts Defense Spending, Sets GDP Growth Target Of 5% For 2023

China’s GDP growth in 2023 is likely to accelerate from the anemic pace witnessed in the past year, even as the government seeks to increase defense spending.

China Plots Steady Recovery: China targets GDP growth of 5% for 2023, according to the “Government Work Report” readout by Premier Li Keqiang at the opening session of the 14th National People’s Congress (NPC) held in Beijing on Sunday, local news outlet China Daily reported.

The country’s GDP growth sagged to 3% in 2022 after a strong post-COVID-19 rebound to 8.1% in 2021. The economic growth in the wake of the COVID-19 pandemic slumped to 2.2% in 2020. Ahead of the pandemic, the Chinese economy was cruising along at a healthy 6%+ pace.

In 2022, China faced setbacks amid frequent recurrences of COVID-19, forcing the shuttering of factories. Amid public protests, the country decided to withdraw its stringent zero-COVID tolerance policy in December 2022. 

The reopening will serve as the biggest catalyst for China’s economic recovery in 2023, investment bank JPMorgan said in a report released last month.

China expects the annual rate of the consumer price index to be around 3% for the year. It targets a deficit-to-GDP ratio of 3%. JPMorgan’s chief China economist Haibin Zhu sees consumer price inflation staying below 2% for much of 2023, before rebounding and approaching 3% toward the end of the year and into 2024, nudged up by the rapid reopening of the economy.

China sees 12 million urban jobs created, with the urban unemployment rate expected to trend around 5.5%.

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Defense Spending To Rise: The country plans to increase defense spending by 7.2% to 1.55 trillion yuan ($224 billion), a draft military budget released by the China Ministry of Finance showed, China Daily reported. This marked a marginal increase from the previous year’s growth of 7.1%. The accelerated spending growth assumes importance amid the ongoing geopolitical threats and an arms race in the region. Tensions between China and Taiwan continue to rise over Taiwan’s territorial integrity, with China claiming the island nation is its province, while the latter claims that it is an independent country.

In the working report made public on Sunday, China said it would resolutely oppose Taiwan's independence and look to advance peaceful reunification.

China also vowed to keep the yuan exchange rate generally stable and continue supporting the private sector.

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