China’s growth trajectory is facing significant challenges as it navigates economic headwinds that threaten its GDP growth target of ‘around 5 percent’ for 2023.

While Beijing has shifted from treating this figure as a strict target to more of a guideline for economic planning, the prospect of missing it still carries implications for the country’s broader economic ambitions, including the long-term goal of doubling per capita GDP by 2035.

The first quarter of 2023 provided some optimism, with China’s GDP growing by an impressive 5.3 percent, prompting international banks to revise their forecasts upwards. For instance, UBS adjusted its growth projection from 4.6 percent to 4.9 percent in April.

However, the enthusiasm was short-lived. A deepening property market slump and the diminishing impact of government measures, such as easing mortgage rules and converting unsold homes into welfare housing, have led economists, including UBS’s Wang Tao, to downgrade their expectations back to 4.6 percent.

The State Council’s growth target, with its emphasis on the word ‘around,’ provides some flexibility, allowing policymakers to claim success even if the final growth figure falls slightly short of 5 percent.

This flexibility is crucial, particularly as the government did not specify a precise GDP growth target for the 14th Five-Year Plan (2021-2025), offering additional leeway in managing short-term economic fluctuations.

Despite the immediate challenges, China’s longer-term goals remain ambitious. In 2021, President Xi Jinping expressed confidence in the country’s ability to double its economy or per capita income by 2035. Achieving this would require sustained growth of approximately 4.8 percent annually for the next 15 years, a daunting task given the current economic climate.

A failure to meet the 5 percent growth target this year would mark the second consecutive miss after 2022, when pandemic controls took precedence over economic expansion.