China Sets Low Economic Growth Target, Increases Military Spending: What You Need To Know

China has set a target of approximately 5% economic growth in 2023, its lowest target in over 30 years while increasing its defense budget.

What Happened: President Xi Jinping is seeking to restore the pre-COVID-19 pandemic levels of growth, and the low 5% target could be indicative of China’s increasing headwinds.

Despite the conservative target, Moody's Investors Service raised its China growth forecast to 5% for both 2023 and 2024, up from 4% previously, citing a stronger-than-expected rebound in the short term.

China is also increasing its defense spending this year by 7.2% to 1.56 trillion yuan ($230 billion), according to a draft released by the Ministry of Finance which Benzinga previously reported on.

Premier Li Keqiang, who announced he is stepping down from his position, gave a speech at the country's state of the union address and said China's "armed forces should intensify military training and preparedness across the board," as it prepares to invade Taiwan, which is expected in 2027, according to a Reuters report.

What's Next: This comes in the context of a potential arms sale to Taiwan approved by the U.S. on March 2, the Wall Street Journal said, which would include missiles for Taiwan's F-16 fleet as the island reports multiple days of large-scale Chinese air force incursions nearby.

Meanwhile, intelligence suggests China is considering sending artillery and ammunition to Russia as it continues to wage its war on Ukraine, according to NBC.

The news of China's increase in military spending boosted Chinese defense stocks including Ligeance Aerospace and Hefei Jianghang Aircraft Equipment Corp, as well as U.S. defense stocks Lockheed Martin Corp LMT, Raytheon Technologies Corp RTX, and Northrop Grumman Corp NOC.

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