Growth-sensitive crude oil and copper are set to start the new week on left footing as investors weigh a weaker-than-expected forecast on annual economic growth in China.
During the opening of the annual National People’s Congress on Sunday, the Chinese administration set a GDP (gross domestic product) growth target of “around” 5% for 2023, a goal of 3% for the consumer price index, and a 5.5% unemployment rate for people in cities, with the creation of around 12 million new urban jobs vs an 11 million target in 2022.
They also laid out eight priorities for economic policy, including the stimulation of the domestic demand — from consumption and investment, followed by improving the industrial system and supporting non-state-owned enterprises, intensifying efforts to attract and utilize foreign investment, preventing and defusing financial risks, stabilizing grain production, continuing green development, and developing social programs.
A modest outlook:
Despite the Chinese officials setting a 5% economic growth target for 2023 over the weekend, the target was seen as softer than analyst expectations of 5.5%-6% growth and presents a moderate outlook for Asia’s largest economy and world’s largest commodities importer as it emerges from three years of COVID disruptions.
China’s GDP only rose by 3% in 2022 in a rare miss of the national goal which was set at around 5.5% growth, mainly due to strict Covid controls, a two-month lockdown of the major economic hub of Shanghai, and the property crisis.
Recent data showed that Chinese business activity rebounded sharply in February after the relaxing of anti-COVID restrictions. But the country may have to contend with a slowdown in external demand, as global economic conditions cool under rising interest rates and high inflation.
The conservative growth target of 5% for 2023 indicates that China’s economic activity will face headwinds, sending lower the growth-sensitive oil and copper prices this morning, since investors were expecting stronger growth from the world’s second-largest consumer and importer of crude oil and industrial metals.
Both Brent and WTI crude oil prices opened the week lower by 1% to as low as $85/b and $79/b respectively, while Copper extended last week’s losses toward the $4.04/lb mark, as the GDP growth target also ramped up fears that a recovery in China will not be as robust as initially thought.