The second meetings of the 14th Chinese People’s Political Consultative Conference (CPPCC) and National People’s Congress (NPC) will be held starting March 4th and March 5th respectively in Beijing, the same dates as the first meetings last year. However, compared to the NPC session of 2023, this year’s agenda is less packed and suggests more routine than last year’s.
Against the backdrop of the 2023 NPC session that installed a new State Council (China’s cabinet) led by a new Premier, the government reshuffle became one of the biggest features of last year, including a restructured Ministry of Science & Technology, the new National Administration of Financial Regulation (successor of the CBIRC), a strengthened CSRC, a new national data bureau, among others.
On top of the reform of government agencies, a key takeaway from last year’s NPC session was the continued strengthening of the ruling Party in key and strategic areas such as finance, S&T, Party construction at grassroot levels, and Hong Kong and Macau affairs, as evidenced by the establishment of Central Financial Commission, Central S&T Commission, Central Social Work Department and Central HK & Macau Work Office. The new agencies continued the trend of empowering Party governance across Chinese economy and society under President Xi.
That said, this year’s NPC session remains critically important given the multifold challenges. Xi emphasized during a reporting session by the central leadership on February 26th that the year 2024 marks the 75th anniversary of the establishment of the PRC and is the key year for the realization of the 14th Five-Year-Plan.
The annual Central Economic Work Conference (CEWC) held on Dec. 11th and 12th 2023 had listed six major challenges facing China, namely: insufficient demand, overcapacity in some industries, weakened social expectations (i.e. market confidence), many potential risks, chokepoints in the ‘domestic circulation’, and complexity, severity, and uncertainty of the external environment. These challenges are most evident in the real estate liquidity crisis, around the mounting local government debt and the persistently weak consumer demand. Also, given Beijing’s increasing emphasis on security and intensifying competition with the US and the EU, the year 2023 saw the lowest net FDI inflow into China since the 1990s.
Economy and foreign relations in the focus of this year’s "Two Sessions"
Dealing with strong economic headwinds and navigating an unabatingly complex international environment may therefore become key words for this year’s NPC session. According to the CEWC, policy coordination was repeatedly emphasized, calling for a modestly beefed-up fiscal policy and more flexible but targeted prudent monetary policy, with a focus on expanding domestic demand and effective investment. Following up on that, the just concluded Central Financial and Economic Affairs Commission (CFEAC) meeting called for a new round of massive upgrading of industrial equipment and consumer goods as well as a reduction of overall logistics costs in society.
Similar messages were brought forward at the quinquennial Central Financial Work Conference (CFWC) in late 2023. The conference stressed that finance is the “lifeblood” of the national economy and key to the country’s core competitiveness, worrying about hidden economic and financial risks and the sector’s ineffectiveness in serving the real economy.
The other quinquennially held Central Foreign Affairs Work Conference (CFAWC) that was held in late 2023 called for a more active China on the world stage, helping shape a new pattern between China and the rest of the world and creating a more favorable external environment.
What to watch?
Generally speaking, it is widely expected that the Chinese government will set again the annual economic growth rate at around 5 per cent to project confidence in a solid GDP growth, while at the same time reassuring the market and international investors about the resilience of Chinese economy. In addition, in order to expand demand and maintain growth momentum, the fiscal deficit rate will at least stay at the 3 per cent of last year or higher.
Also, the newly minted concept of “new productive forces” (新质生产力) has put the innovation-driven establishment of a modern-day industrial system at the center of Chinese development for the next stage. The recently concluded Central Commission for Comprehensively Deepening Reform (CCCDR) meeting, the Party’s top reform policy body, stated that China needs to speed up the “formation of systems supporting comprehensive innovation”. It would thus come as no surprise if the NPC were to unveil more support for China’s tech-centric growth model.
The above mentioned CCCDR meeting addressed challenges in development by reaffirming the key strategy of reform and opening-up. This reiteration is set to be emphasized also in the government work report so as to mitigate concerns about China’s approach toward foreign investment, a key factor in China’s past decades of strong economic performance. The spate of Chinese laws on data security and espionage have raised alarm among the foreign business community that China is prioritizing national security above economic development. As a result, more concrete supportive policies and measures that help may follow.
At the same time, there will be no major personnel change for this year’s NPC session. But one of the key appointments will be new Chinese foreign minister after Qin Gang was removed after only months in the position and the veteran and top diplomat Wang Yi took his position on a temporary basis. In a statement issued by the NPC Standing Committee on February 27th, Qin Gang’s NPC delegate position was suspended. It is widely anticipated that Liu Jianchao, currently the Head of the International Department of the CCP Central Committee, a veteran and soft-spoken diplomat, will take over the reins as China’s new Foreign Minister.