Is China’s Era of High Growth Over?

China’s real growth agenda

China announced an official growth target of about 5 percent on Tuesday that’s already looking hard to pull off. The world’s second-biggest economy is facing headwinds, from a consumer slowdown to weak investor confidence and a trade war with the West.

But the growth target only tells part of the story of how Beijing is rethinking economic policy.

Left out of the pronouncements: a stimulus package. Investors watch the annual gathering of the National People’s Congress, the country’s rubber-stamp parliament, and a parallel meeting of China’s top policy body, for clues on the government’s priorities. Spending is set to remain at roughly last year’s level, suggesting that there’s no big-bang boost on the horizon.

That’s not great news for Western brands that have ridden a surge in Chinese consumer spending to big growth in recent years. Apple reportedly has seen its Chinese iPhones sales plummet this year.

The growth target matches last year’s too, when the post-lockdown economy grew 5.2 percent. (Some analysts say the real growth rate is much lower.) Global investors need to accept that slow growth is the new norm, says Yu Jie, a senior fellow on China at Chatham House, a think tank. “Beijing wants to draw a line under the past economic model which focused on infrastructure and property,” she told DealBook.

Beijing’s real focus is reshaping the economy. The government knows that it faces a raft of challenges, but China’s leader, Xi Jinping, is trying to move away from debt-fueled sectors like property and move toward strategically important industries. The terms it uses are “high-quality development” and “new productive forces,” which includes electric vehicles, climate tech, life sciences, and artificial intelligence. The latest measures to achieve that: Premier Li Qiang, China’s second-highest official, said on Tuesday that the government would increase spending for science and technology research by 10 percent.

More state-led investment is the priority, rather than “other kinds of more politically painful reforms,” George Magnus, a research associate at Oxford University’s China Center and a former chief economist at UBS, told DealBook.