China set its economic growth target for this year at 6% or more at the National People's Congress, which started on March 5. The country's current five-year plan does not specify an average annual growth target, but it outlines a long-term vision of improving China's economic and technological capabilities, as well as its overall national strength, to become a midtier developed country by 2035. As China's national strategy to surpass the U.S. becomes clear, there are concerns that friction between the two countries will grow.
China's economy was hit by the new coronavirus pandemic, contracting 6.8% in the first three months of 2020. It subsequently recovered, achieving 2.3% growth for the full year. The size of its economy is already more than 70% that of the U.S. The Japan Center for Economic Research forecasts that China's nominal gross domestic product will exceed that of the U.S. in 2028.
Last year, President Xi Jinping declared that it was possible for China to double the size of its economy or per capita income by 2035, and national and local governments are already working on blueprints to do so. The emphasis of the new growth target is not on doubling, but the basic thinking remains the same.
China’s claim that its economy is the world's sole winner has backfired, and the administration of U.S. President Joe Biden is becoming increasingly wary of Beijing. It sees China as the only competitor that can challenge the current international order. China's plans to support artificial intelligence, semiconductors, aerospace and other fields related to the military also stand out.
In Beijing's budget plan for 2021, defense spending increased 6.8% from the previous year to 1.36 trillion yuan ($209 billion), a greater increase than the 6.6% jump in the 2020 budget plan. While other countries are busy fighting the pandemic, China's military buildup is facing scrutiny.
The economic growth target of 6.0% or more proposed for this year by Premier Li Keqiang is reasonable. Some in China are predicting growth of about 8%, but the economy still faces many issues, such as sluggish consumer spending and a lag in the employment recovery. The global economic outlook is also uncertain. The 6.0% figure should be understood as the minimum target under the "dual circulation" growth model, which seeks to reduce dependence on foreign suppliers through a domestic cycle of production, distribution and consumption, while also tapping external demand.
Issues related to Hong Kong must not be overlooked. The National People's Congress this year plans to change the city's electoral system. Under the principle of "patriots governing Hong Kong," authorities aim to keep democrats out of the Legislative Council and other elected bodies.
A political system that does not reflect the will of the people will lead to an exodus of talent from the international financial hub. This unilateral measure, which follows the implementation of the Hong Kong security law last year, is a serious challenge to China's pledge of "one country, two systems," and it will not escape international criticism.