Xi Vows to Strengthen Economic Recovery After ‘Tough’ Year

People have their dinner at a restaurant as a screen broadcasts China's President Xi Jinping while delivering his New Year's speech in Beijing on December 31, 2023. Photographer: Pedro Pardo/AFP/Getty Images

(Bloomberg) -- Chinese President Xi Jinping pledged to strengthen economic momentum and job creation, acknowledging some companies and citizens had endured a difficult 2023 in a rare admission of domestic headwinds facing the country.

While China's most-powerful leader since Mao Zedong used his annual new year address to trumpet his nation's achievements, he also conceded some “enterprises had a tough time” and “people had difficulty finding jobs and meeting basic needs.”

“We will consolidate and strengthen the momentum of economic recovery, and work to achieve steady and long-term economic development,” Xi said in the televised message Sunday, beamed to his nation's 1.4 billion people. China's much-anticipated post-pandemic economic boom failed to materialize in 2023.

The government's goal is “delivering a better life for the people,” he added, pledging better education and career opportunities for the young, and healthcare for the elderly. China's youth unemployment hit a record high over the summer, before the government stopped publishing figures.

Improving people's well-being has been a key component of the social contract the Communist Party has relied on for decades for its ruling. A new year awash with economic challenges will test that pact: China is entering a pivotal period as policymakers try to boost growth, stabilize a crisis in the property market and prevent the world's second-largest economy from sleepwalking into deflation.

Beijing is expected to target a growth goal of around 5% again in 2024, avoiding the self-fulfilling negative cycle a lower number could create. Sustaining that level of growth will be harder due to a higher comparison base.

Bolstering confidence in China will be crucial this year. Concerns over Beijing's opaque policymaking spooked investors in 2023, while higher interest rates overseas spurred capital outflows. A recent crackdown on the gaming industry sparked a $80 billion meltdown, stoking fresh concerns over policy swings, as foreign investors recorded their smallest-ever annual purchases of Chinese stocks.

Signs of weakness in the economy are persisting, with factory activity shrinking in December to the lowest level in six months, likely adding pressure for policymakers to act urgently to inject impetus to the economy.

Despite that, Xi on Sunday touted Chinese “manufacturing prowess” and rattled off a list of homegrown projects including the domestically-built C919 passenger jet, a made-in-China cruise ship, the nation's space programs, maned submersibles, and electric cars.

Xi also his used his speech to reiterate the ruling Communist Party's position that China will “surely be reunified” — an allusion to Taiwan, the self-ruled island Beijing considers its own and has vowed to claim, by force if necessary.

His comments come just weeks before Taiwan's voters go the polls to pick their next president, as a looming US election also brings fresh geopolitical risks. Turmoil is still rumbling through the upper echelons of China's military leadership, with more senior figures purged from top bodies last week.

That raises questions over how ready China's military would be for any invasion of Taiwan, with the rocket force that manages the nation's missiles under the spotlight. Beijing also abruptly removed its foreign minister last year, without explanation, adding to the instability.

Taiwan's hotly-contested election on Jan. 13 will decide how the island of more than 23 million people will respond to Beijing's moves. The incumbent Democratic Progressive Party seeks to strengthen Taipei's ties with Washington, while the opposition Kuomintang — an increasingly close second in the most recent polls — is Beijing's preferred negotiating partner on the island.

“All Chinese on both sides of the Taiwan Strait should be bound by a common sense of purpose and share in the glory of the rejuvenation of the Chinese nation,” Xi said.

(Updates throughout.)

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