Politburo meeting: China’s top leaders are silent on the country’s GDP targets

In early march, the Chinese government had said the country would target gross domestic product growth of about 5.5% this year. While that would be China’s lowest official target for economic growth in three decades, economists have said it is becoming increasingly impossible to achieve.

Now the country’s leadership is silent on growth targets. At an important meeting of top leaders on Thursday, there was no mention of GDP targets, and analysts have said this is a sign that the government believes it may not be able to meet its targets after all.

Instead, the country will now “striving to achieve the best possible results,” he said a statement after the Politburo – China’s highest decision-making body – met on Thursday to assess the latest status of the economy and set policy tone for the second half. The government will also focus on stabilizing employment and prices, the statement said.
The meeting was chaired by President Xi Jinping and attended by other members of the Politburo. The group of 25 top civil servants oversee the ruling communist party.
Chinese economy records slowest growth since early 2020

The tone of this meeting contrasted sharply with the previous Politburo meeting in April, when policymakers pledged “to strive to meet economic and social targets” for this year.

“Since China grew only 2.5% in the first half, it was original [annual] target of about 5.5% is too high,” Larry Hu, chief economist China at Macquarie Capital, said in a report late Thursday.

“In today’s meeting, policymakers used the new phrase ‘go for the best outcome’. It means they no longer see 5.5% or even 5% as feasible for this year,” he added.

Betty Wang, senior China economist at ANZ, also said on Friday that policymakers are “willing to miss the growth target”.

No flexibility at zero Covid

Despite slowing growth, top leadership did not suggest flexibility regarding the zero-covid policy at the meeting, which is: a major drag on the Chinese economy.

The policy has special “political significance,” the Politburo statement said.

Analysts now think China will stick to its rigid Covid strategy until next year.

“The Politburo pledged to stick to the zero-Covid strategy, and for the first time explicitly stated that politics is a particularly important factor to consider when dealing with the relationship between Covid controls and socio-economic development,” Nomura said. analysts in a report on Thursday.

Chinese President Xi Jinping (below) is welcomed by members of the government as he arrives for the closing session of the Chinese People's Political Consultative Conference (CPPCC) at the Great Hall of the People on March 10, 2022 in Beijing, China.  China's annual week-long political meeting known as the Two Sessions convenes the country's leaders and lawmakers to set the government's domestic economic and social development agenda for the following year.

“This supports our view that Beijing will maintain the zero-covid strategy, at least until March 2023, when the current political realignment is fully completed,” she added.

Nomura added that it expects China to grow by 3.3% in 2022.

The Communist Party will undergo a leadership reshuffle at its 20th Party Congress this fall. President Xi Jinping is expected to aim for a historic third term in office at the meeting. If successful, he will be re-elected as president in the parliamentary session in March 2023.

Real estate crisis and financial risks

However, policymakers recognized on Thursday that the economy faces significant challenges and called for increased efforts to address them a recent mortgage crisis.

In recent weeks, thousands of disgruntled home buyers have threatened to stop paying mortgages for unfinished homes if construction isn’t completed on time. The boycott came at a time when a growing number of projects have been delayed or stalled due to a lack of funds among project developers.

“[We] must stabilize the real estate market,” said the Politburo statement said.

It stressed that local governments must take responsibility for ensuring that presold homes are completed and delivered to home buyers.

China Efforts to Raise the Alarm on Mortgage Boycotts and Bank Runs

“In other words, the central government is unlikely to create a mega-fund to buy out most unfinished projects,” Macquarie Capital’s Hu said.

The Politburo also discussed efforts to maintain the overall stability of the financial system, resolve risks related to local rural banksand crackdown on financial crimes.
The past weeks, mass protests have broken out in central China as thousands of savers were unable to access their savings at several rural banks in Henan and Anhui provinces. In the wake of the protests, local authorities agreed to start refunding some bank customers whose accounts have been frozen for months.

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