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China's local governments set growth targets for 2023, offering clues on economic recovery

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Hong Kong

Several major provinces and cities in China have announced their growth targets for this year, most of them above 5%, offering the first clues about the country’s economic trajectory in 2023.

Local governments across China began meeting this week for annual legislative sessions, setting out their respective policy goals for the year. the meetings will culminate in the national parliamentary session to be held in March, in which the prime minister is expected to announce the country’s GDP growth target.

Guangdong, the southern manufacturing and export giant, announced on Thursday that it aims to grow its economy by 5% or more this year.

Wang Weizhong, the provincial governor, estimated that its economy expanded by only about 2% in 2022, missing the target of 5.5% by far.

“It was not easy to achieve this result,” Wang said in a speech. He added that the economy has encountered difficulties not seen in “many years”, including reduced demand, supply chain shocks and weakening expectations.

This year, Guangdong will focus on growing its economy, including supporting manufacturing industry, accelerating economic integration with neighboring Hong Kong and Macao, and helping private enterprises, Wang said.

Guangdong accounts for more than a tenth of China’s total economic output. In 2021, its GDP was slightly higher than that of South Korea, which is the tenth largest economy in the world.

China’s economy is in bad shape because of three years of Covid lockdowns and a persistent housing market slump. Economists generally expected growth to fall to a rate of between 2.7% and 3.3% in 2022, below the government’s target of 5.5%.

Tourists visit the Bund in Shanghai, China, 6 January 2023

Policymakers have recently turned their focus to boosting growth after swiftly dismantling the draconian Covid-zero policy in early December. They also softened their stance on the troubled technology and property sectors, which have been reeling from a broad regulatory crackdown since 2020.

The signs have boosted investor and analyst confidence about a significant recovery in China’s economy in 2023. So far, a group of government economists and international analysts have said they expect Beijing to set a growth target of above 5% in 2023.

On Thursday, Zhejiang Province, another major economic power, announced is targeting an expansion of more than 5% in 2023. Last year, the economy grew only about 3% amid “unexpected shocks and challenges”, said its governor, Wang Hao.

He pledged to focus on boosting the digital economy to make it a bigger engine of growth. The province is home to several of the country’s largest technology and manufacturing companies, including Alibaba (BABA) and Geely Auto (GELYF).

Earlier this week, the municipal government of Hangzhou, home to Alibaba, signed a strategic cooperation agreement with the tech conglomerate. Top city officials praised Alibaba’s role in helping the local economy and pledged “unwavering support” to the company, according to the government statement.

On Wednesday, Shanghai, mainland China’s wealthiest city, announced it was targeting 5.5% growth this year. Last year, its economy grew by 3%, according to the city’s mayor, Gong Zheng.

Shanghai, which is the country’s financial and maritime hub, was hit hard by a two-month Covid lockdown in April and May. The city’s tax revenue contracted last year, below its previous target of 6% growth, Gong said. By industry, the The combined hotel and restaurant sector was hardest hit, recording a 63% drop in revenue for the full year of 2022.

Gong said the city will strengthen its role as a financial hub and develop offshore yuan trading and cross-border trade arrangements. It will also try to attract more international business.

On the same day, the provinces of Fujian, Sichuan and Hebei announced growth targets of 6% for 2023, while Jiangxi province set a more ambitious target of 7%.