China’s leaders have pledged to upgrade the economy. Why are investors so skeptical?

Chinese leaders have pledged to achieve an ambitious growth rate this year, while reshaping its economic model to focus on technology innovation.

Chinese leaders have pledged to achieve an ambitious growth rate this year, while reshaping its economic model to focus on technology innovation. But how Beijing will implement this vision remains unclear, and its resistance to any major stimulus measures to increase income and spur consumption has disappointed investors, sending them toward the exits. On Tuesday, Premier Li Qiang announced that economic growth target of around 5% for 2024, which he said “will not be easy” to hit, given that a Covid-battered 2022 had provided a lower base of growth for last year. He also vowed to make industrial upgrading a priority and lean into tech innovation. After the targets were announced on Tuesday, Hong Kong’s Hang Seng Index tumbled 2.6%. The index has fallen by about 1% so far this week and has lost nearly 20% over the past 12 months. “The level of support is likely too little to rocket the economy to its 5% growth target this year,” said Sarah Tan, an economist at Moody’s, referring to the measures announced by Li Tuesday. She said higher household spending was needed to put an end to deflation in China. Deflation refers to a sustained and broad decline in price levels for goods and services.