Opinion | China’s focus on hi-tech, advanced sectors could hold key to revival

The “two sessions” held annually in Beijing, which for this year concluded last week, have captured global attention because of the interconnection between China’s economic recovery and the growth of the world economy.

With an ambitious 5 per cent growth target set for 2024, the Chinese government faces significant challenges, as acknowledged by Premier Li Qiang during the National People’s Congress meeting. While China’s GDP growth of 5.2 per cent last year is commendable, ordinary citizens have not experienced the anticipated economic rebound.

Consumption remains weak, entrepreneurs lack confidence to invest and foreign direct investment has declined. These obstacles pose significant threats to China’s economy, which is burdened by issues ranging from overcapacity and a sluggish housing market to a mounting debt crisis. Moreover, this year began with a stock market rout and deflation levels not witnessed since the global financial crisis in 2008-09.

This year is the Year of the Dragon, and it is fascinating how a single letter like “D” on a number plate could command a staggering price of HK$20.2 million (US$2.6 million) in Hong Kong. However, despite the auspicious connotations traditionally associated with the dragon, the letter “D” does not augur well for China this year. Instead, it represents a series of challenges facing the country.

The first is deflation. China’s economy experienced deflation last year. This deflationary trend, although temporarily offset by a rebound in consumer prices during the Lunar New Year holiday, stands in contrast to the inflationary pressures faced by other major economies.

Deflation is worrying as it can dampen economic growth, worsen unemployment and exacerbate provincial government debt problems.