China has moved a step closer to transition to a new leadership. Premier Li Keqiang, the most senior figure who will step aside in the coming days, yesterday delivered his last work report to the annual legislative session of the National People’s Congress. His global audience focused on the nation’s headline economic growth target for this year. But the economic outlook after China’s emergence from its zero-Covid pandemic regime dominated his speech. China has set a post-Covid economic growth target of 5 per cent, compared with last year’s actual growth of 3 per cent. It reflects realism and caution, in the face of expectations China is capable of more than 5 per cent – even 6 per cent. After all, the economy is in recovery mode, led by good manufacturing indicators. An achievable pace of recovery By setting the target at around 5 per cent, Beijing is aiming at an achievable pace of recovery, given that it is going to be drawn out and that sustainability and stability are key. By resisting an aggressive target it has left room for necessary reform and timely control of risks, spelled out abundantly in the work report. So any notion that the Communist Party would be tempted to forsake prudence and push for short-term growth to mark the first year of President Xi Jinping’s third term of office has proved unfounded. The strategy is very much about emphasis on fiscal discipline and sustainability. Evidence of that is to be found in government spending, with the debt-to-GDP ratio set at 3 per cent, moderate and prudent compared with the upper range not ruled out by some investment houses and economists. The work report graphically offsets the positives against the negatives in China’s wider economic outlook. It concludes that thanks to risk factors, China’s basic growth momentum may remain unchanged. Chinese Premier Li Keqiang bows out with appeal for economic recovery It will still have the world’s largest consumer market, a supply chain able to sustain a strong manufacturing sector, some breakthroughs in science and technology despite all the containment measures imposed by the United States, and the supporting pillar of a vibrant and dynamic economy. But external risk factors are shaping as ever present and long term. They include containment policies from the West, trade friction and geopolitical uncertainty. At the same time, however, while other economies have suffered from high inflation and currency turbulence, Li’s listed achievements include sustainable currency levels, and relatively stable prices, inflation and other key indicators. Self-reliance on science and technology Li rightly devoted a lot of space to China’s need to strengthen its position in science and technology, including the need to strive for self-reliance in the face of American restrictions on access to technology and containment policies against China. A commitment to 2 per cent growth in spending on science and technological development defies pressure on government spending across the board. Moreover, investment in basic scientific and technological research further illustrates Beijing’s determination, with research and development spending of more than 3 trillion yuan (US$433 billion) now accounting for 2.55 per cent of GDP, which compares well with countries at a similar stage of development. But it remains important to secure the participation of the private sector, especially wen it comes to driving innovation. So there is a need for action to back up talk about support for the platform economy, respect for private sector property rights and promotion and nurturing of the entrepreneurial and innovative spirit. China will continue to broaden its trade base beyond exports to and imports from the US, focusing on Belt and Road Initiative partners and regional and global free-trade networks. Why did Beijing set a moderate target for China’s GDP in 2023? On Taiwan, the report restated China’s “red lines” on separatist and independence activities, reiterating the importance of cooperation and exchanges. The economic emphasis is also to be found in the reference to Hong Kong, which is seen to be moving towards stability but needing to further improve governance and revive its economy. The city would have to think how it could better integrate with the Greater Bay Area, a reminder that the GBA will continue to be a national strategic focus. Hong Kong would also have to exploit its unique strengths in science and technology, which includes fintech. The report confounds fears that priority for economic growth would come at the expense of environmental protection. Indeed improving the environment is seen as a precondition for achieving sustainable economic growth. Li highlighted China’s progress against pollution and in improving air quality in particular, pledging that the environment would not be sacrificed for short-term growth. All in all, Li’s final work report sets a balanced approach, with the focus on longer-term sustainability and recovery. It recognises the need to balance risk control and economic growth while leaving room for reform necessary for China to upgrade its economy.