Status: 03/11/2022 09:30 a.m
The weak global economy and disrupted supply chains are leaving their mark on the Chinese economy. The growth target is lower, but the military budget is significantly higher. Tax cuts should help companies.
The Chinese People’s Congress in Beijing, with almost 3,000 delegates in the Great Hall of the People, voted for a sharp increase in the military budget and approved the government’s growth target for the current year, which is 5.5 percent. Because of the poor global economy, the uncertainties caused by the Ukraine war, disrupted supply chains and problems such as the real estate crisis and over-indebtedness, it is the lowest target for three decades.
Nevertheless, experts regard it as ambitious and exceeds the expectations of the International Monetary Fund (IMF), which expects China’s gross domestic product to grow by only 4.8 percent. In 2021, China’s economy had grown by 8.1 percent, but this was also due to the low basis for comparison due to the pandemic in the previous year.
planned tax cuts
In order to support the economy, China wants to lower taxes and duties. This is the fairest, most direct and most effective tool to help companies, said China’s Premier Li Keqiang at the end of the People’s Congress. Small companies in particular should therefore benefit from the government’s plans.
The fertilizer must reach the root, only then can the plant grow, said Li Keqiang, who warned of “downside risks”, “complications” and “uncertainties” for the Chinese economy. Tax rebates are expected to reach around 2.5 trillion yuan this year, equivalent to 360 billion euros.
Military budget significantly increased
While the growth target is relatively low, the military’s resources will be increased significantly. As expected, delegates also approved the budget, which envisages a significant increase in defense spending this year by 7.1 percent. It is the highest increase in three years. Total spending, on the other hand, is only expected to grow by 3.9 percent.
In 2020, China spent around $250 billion on the military. For comparison: US military spending this year was just under 780 billion. Russia’s military budget was almost 62 billion dollars, Germany’s budget was just under 53 billion dollars.
The sharp rise in Chinese military spending comes amid threats from the communist leadership towards democratic Taiwan and China’s territorial disputes with its neighbors in the South and East China Seas. China’s determination to “reunify” Taiwan was also reaffirmed at the annual meeting.
Rising tensions over Taiwan
The government in Beijing regards Taiwan as part of the People’s Republic and is increasingly threatening military conquest. Rising tensions between China, Taiwan, the US and even Japan are also raising concerns about the Russian invasion of Ukraine. Several senior former US officials visited Taiwan last week to send a signal of US support in the face of the Ukraine crisis.
The US has committed to Taiwan’s defense capability and is supplying weapons. Previous US administrations have left open whether they would come to the island’s military aid in the event of an attack to deter Beijing. But US President Biden said in October that the US had an “obligation” to do so.
Criticism of Russia is avoided
At the end of this year’s meeting, Chinese Prime Minister Li Keqiang continued to avoid criticizing Russia for the invasion at a press conference. The prime minister also spoke out against international sanctions against Russia. “The sanctions in question are harming the world’s economic recovery,” Li Keqiang said. “No one is interested in it.”