(Bloomberg) -- China set its annual growth target at around 5%, an ambitious goal that will put pressure on the nation’s top leaders to unleash more stimulus as they try to lift confidence in an economy hampered by a property slump and entrenched deflation.

Premier Li Qiang acknowledged the challenges facing the world’s second-largest economy as he delivered his first work report to the national parliament at its opening Tuesday. “It is not easy for us to realize these targets,” he told thousands of delegates assembled at the Great Hall of the People in Beijing. “We need policy support and joint efforts from all fronts.”

The gross domestic product target met economists’ expectations for Beijing to repeat last year’s goal, but will be harder to achieve due to a higher base of comparison in 2024. Analysts in a separate Bloomberg survey forecast the economy would likely expand by 4.6% this year, underscoring the challenges facing policymakers as they try to resist big stimulus.

“The around 5% target is probably intended to boost confidence. But the specific measures unveiled may have limited impact on lifting sentiment,” said Jacqueline Rong, chief China economist at BNP Paribas SA. “We think it is not easy to achieve the growth target,” she added, noting the bank is holding its forecast for this year at 4.5%.

Chinese stocks listed in Hong Kong fell Tuesday after the key targets were announced. The Hang Seng China Enterprises Index slumped as much as 3%, the biggest decline in more than one month, while the onshore CSI 300 Index swung between gains and losses before edging slightly higher in the afternoon session. The yuan was little changed both onshore and offshore on Tuesday. 

China’s most high-profile annual political meeting comes as President Xi Jinping tries to restore faith in an economy grappling with a prolonged real estate crisis, dwindling domestic demand and headwinds from its geopolitical rivalry with the US. Investors have called for strong action, as foreign executives continue to recoil from the world’s second-largest economy after years of abrupt policy swings. 

Adding to the challenges, the 3% inflation target announced at the National People’s Congress means the country is aiming for nominal growth of about 8% again this year. In reality, China is battling the longest period of deflation since the late 1990s, meaning the economy only expanded 4.6% last year, before adjusting for inflation. With prices still falling, a strong expansion will be hard to achieve.

Li’s report delivered to delegates assembled from across the nation of 1.4 billion people will be scoured for clues on authorities’ plans for fiscal and monetary stimulus, which could impact global commodity prices and inflation. The premier has previously signaled officials won’t rely on massive stimulus to spur expansion as they try to break the country’s reliance on debt-driven growth.

Despite that, there were some signs of stepped up support. China unveiled plans to issue 1 trillion yuan ($139 billion) of ultra-long special central government bonds in 2024. That rare move is also planned for the coming years to support key national strategies, the report said.

The step, which Bloomberg News earlier reported the government was considering, marks only the fourth such sale in the past 26 years, with the most recent one in 2020 when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures.

And while China kept its headline fiscal deficit at last year’s 3% target, a rare mid-year expansion in October set precedent for ad hoc tweaks. Starting with a more cautious goal showed officials are “balancing growth and risk prevention,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc.

“The deficit will continue to be mostly shouldered by the central government, which will step up transfer payment to local governments to help prevent and resolve local debt risks,” he added. The Ministry of Finance’s report released Tuesday vowed to “firmly curb new hidden debt and resolve existing debt in an orderly manner,” underscoring authorities’ efforts to manage local government’s balance sheets.  

Beijing’s willingness to expand its own borrowing to take the heat off indebted local authorities isn’t without constraints. Interest payments on central government debt in 2024 is forecast to rise nearly 12% from last year, and will represent the second-largest outlay for authorities after the defense budget.  

Xi’s mantra that “housing is for living in, not speculation” was omitted from the work report for the first time since 2019, as top leaders try to stabilize a property market that once drove about a quarter of GDP. That slogan has consistently been used by officials since 2016, and became an important way for Beijing to signal its intention to cool a then-overheating market.

Authorities also vowed to “to prevent overcapacity” in some key industries, as companies suffer from squeezed profits margins from cutting prices to remain competitive. China’s overcapacity is also stoking tensions with trade partners including the US and the European Union.

Still, the extent to which China’s economic expansion is reached, or spread across the entire economy, is increasingly difficult to ascertain given greater restrictions on data accessibility, said Chong Ja Ian, an associate professor of political science at the National University of Singapore.

China abruptly scrapped a three-decade tradition for the premier to hold a press conference at the NPC, a platform that offered a rare chance for the public to interact with a top leader and probe economic decisions. That move will likely fan investor fears about transparency that is already denting confidence in policymaking in China.

Canceling that briefing was probably the biggest surprise of this year’s confab. Premier Li’s report offered no major moves to boost confidence or lift expectations for strong supportive measures, analysts said.

“I don’t expect sentiment to see a huge boost as the authorities’ message remains largely unchanged,” said Alex Loo, macro strategist at TD Securities. “No big stimulus package given debt concerns and an intention to keep growth steady and sustainable.”

--With assistance from Tom Hancock, Fran Wang, James Mayger, Yujing Liu, Rebecca Choong Wilkins, Wenjin Lv, Iris Ouyang, Colum Murphy, Lucille Liu and Zhu Lin.

(Updates throughout.)

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