China aims to increase its gross domestic product by around 5% by 2023

China has set its economic growth target at around 5% for 2023, a target more modest than some had previously forecast as the country’s leadership takes into account a host of troubles plaguing the world’s second-biggest economy.

The figure was revealed in the latest work report from Premier Li Keqiang’s government, which was presented on Sunday morning, according to the official Xinhua News Agency. The announcement comes at the start of China’s National People’s Congress, the country’s annual parliamentary gathering, which will last more than a week.

The GDP target builds on a low base effect in 2022, when the economy, battered by repeated Covid restrictions, grew by just 3%, falling well short of its previous expansion target of around 5.5%.

Ahead of the NPC’s opening session, economists had largely expected growth to accelerate to more than 5%, thanks in large part to the faster-than-expected exit from ‘zero Covid’ and a rebound in domestic consumption. The government is even considering raising its GDP target to as much as 6% for 2023, according to a Reuters report published on Thursday, as officials sought to boost market and consumer confidence.

“The target of around 5% is more reasonable,” says Shen Meng, chief executive of Beijing-based boutique investment bank Chanson & Co. “It’s more in line with downward pressures, including a slowdown in exports and consumption.”

Shen says the government is unlikely to resort to large-scale stimulus, partly due to inflation concerns. China’s economy was already showing signs of recovery in March, when the National Bureau of Statistics said the manufacturing purchasing managers’ index (PMI) rose to 52.6 in February — the highest since April 2021. The reading was stronger than expected sparked a rally in Hong Kong stocks.

To further boost growth and boost market confidence, Li said China will support the development of platform companies, deepen state-owned enterprise reform and encourage the private sector to become bigger and stronger.

His comments reflect the return to pragmatism that came after President Xi Jinping in the 20th century^th party conference last October. Meanwhile, Li is widely expected to be succeeded by Xi’s loyalist Li Qiang, who was previously Shanghai party secretary and oversaw the financial hub’s bloody, month-long lockdown in 2022. However, the new Li has also been praised in the past for his pro-business approach and enjoys Xi’s trust, potentially giving him greater autonomy in managing the economy.

Other key officials are also likely to retire at the parliamentary session, including reform-leaning central bank governor Yi Gang and Vice Premier Liu He, a Harvard University graduate who in 2013 called for the market to play a “crucial” role in the economy.

They are expected to be replaced respectively by Xi’s close allies, Zhu Hexin, chairman of state-owned financial conglomerate Citic Group, and He Lifeng, head of the National Development and Reform Commission.

Despite pledges to accelerate growth and boost market confidence, distrust of private entrepreneurs appears to persist within the Communist Party. A number of tech billionaires, such as the co-founder of Tencent and the country’s third richest person Pony Ma, are not included in the list of delegates attending parliamentary sessions.

The absent moguls have historically held key positions on government advisory bodies and used parliamentary sessions to advocate for policies such as deeper integration of digital technologies into the real economy and accelerating the development of artificial intelligence and autonomous driving.

But last year, Tencent was hit by China’s sweeping crackdown on the tech sector and suffered from a lack of new gaming licenses as authorities focused on tackling social problems like gambling addiction among the country’s youth. Former participants were replaced by figures such as Zhang Suxin, chairman of Hong Kong-listed semiconductor maker Hua Hong, and Li Shushen, chip expert and president of the University of the Chinese Academy of Sciences. The delegate lists are revised every five years.