The BGA China Team wrote an update to clients on China’s “two sessions.”

Context

  • China’s “two sessions” — the annual meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) — began in Beijing March 5 and March 4, respectively. The NPC is China’s legislature, and the CPPCC is the country’s top political advisory body. Both operate under the direction and oversight of the Communist Party of China. The two sessions are responsible for setting the government’s annual legislative agenda and announce new government plans and initiatives as well as important government targets for the upcoming year.
  • The 14th NPC kicked off as part of China’s “two sessions,” one of China’s most prominent annual political events on March 5. The NPC opened the day after the CPPCC, and the two back-to-back events together form the “two sessions.” Premier Li Qiang presented his first government work report, outlining three economic targets for 2024. These targets include a 5 percent increase in GDP growth in 2024, a budget deficit equal to 3 percent of GDP and the creation of 12 million new jobs to target an urban unemployment rate of approximately 5.5 percent.

Significance

  • China’s leadership has acknowledged that mistakes in policymaking over the past several years have contributed to the current economic slowdown. This period of reflection has revealed that both external factors, such as heightened tensions with the United States, reduced external demand, the impact of the COVID-19 pandemic and internal issues, including diminished confidence in the government and its economic policies, weak domestic demand and overcapacity, have played significant roles. These challenges stem from a deprioritization of economic development, a resurgence of ideological policymaking, a shift from peaceful to aggressive “Wolf Warrior” diplomacy influenced by rising populism and a bureaucracy that has led to passive local governance and policy inconsistencies. Notably, abrupt policy shifts in sectors like real estate, education and platform economies have been more politically or national security-driven rather than economically focused.
  • The Chinese economy faces a looming property crisis among developers after a windfall of excessive borrowing and weak demand from consumers. The government has not shown any sign of employing a substantial bail-out mechanism or that it is prepared to revive the economy from this crisis, but Li struck a note of economic confidence in his report. The challenges facing the economy may explain why China could be eager to project increased economic openness now as it seeks to increase the confidence of domestic entrepreneurs and attract foreign investors.

Implications

  • The government has declared stabilizing economic growth as its foremost priority for 2024, marking a strategic policy shift as evidenced by discussions during the “two sessions.” This shift is encapsulated in four “first” principles: prioritizing economic development overall, emphasizing the quality of economic development, focusing on the development of “new type productivities” such as artificial intelligence and biotechnology. The principles also include high-end manufacturing and placing science, technology and education at the forefront of these new productive forces. This approach indicates a significant realignment toward rejuvenating the economy through focused, quality-driven measures.
  • China is pursuing various options to attract more foreign investors, such as removing all barriers to investment in the manufacturing sector and easing the limits on investment in service industries like health care and telecommunications. Loosening these restrictions presents more opportunities and flexibility to participate in these industries, making it easier for foreign businesses to enter the Chinese market.

We will continue to keep you updated on developments in China as they occur. If you have any comments or questions, please contact BGA Adviser Eric Wang at ewang@bowergroupasia.com.

Best regards,

BGA China Team

A small ginko leaf

Advisor

Eric has over two decades’ experience in government affairs and public relations and currently serves as firm partner and managing director of Yuan Associates. He has worked with more than 80 clients in manufacturing, agriculture and food, consumer goods and service industries. Eric joined Yuan Associates in 2005 and become a partner and managing director in 2011. As managing director, he is responsible for comprehensive government affairs service for and management of clients. As a partner his responsibilities include overseeing the firm’s daily overall operations. Prior to joining Yuan Associates, Eric worked as an account manager for Euan Barty Associates ... Read More