‘Two sessions’ 2024: risks ahead but China’s economy to stay on long-term, tech-led course
- In his maiden work report to the National People’s Congress, Li Qiang says growth target of 5 per cent won’t be easy
- Funding for science to underpin push for self-reliance amid containment efforts by the US, analysts say
“In setting the growth rate, we have taken into account the need to boost employment and incomes and prevent and defuse risks,” he said. “Achieving this year’s targets will not be easy.”
“Global economic growth lacks steam and the regional hotspot issues keep erupting. This has made China’s external environment more complex, severe and uncertain,” he said.
But there was no announcement of any splashy quick fixes. The government would press on with a “proactive fiscal policy and prudent monetary policy”, the premier said, suggesting no major change in the leadership’s approach to the economy.
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Chinese Premier Li Qiang delivers his first work report amid concerns about state of the economy
That strategy was reflected in other targets. As in 2023, the government is aiming for an urban unemployment rate of around 5.5 per cent and is pushing for the creation of more than 12 million new jobs in cities this year. The goal is in range of the 11 million target and 12.44 million jobs created last year, according to official data.
Inflation is forecast to be around 3 per cent, the same target as 2023, and well above the mere 0.2 per cent actual inflation of last year.
China kept its headline fiscal deficit at last year’s 3 per cent target.
But China will issue 1 trillion yuan (US$139 billion) in central government special bonds and 3.9 trillion yuan in local government ones.
In addition, it announced it would issue “ultra-long term special treasury bonds” starting this year and over each of the next several years, in order to “systematically address funding shortage facing major projects”, according to the work report.
Premier’s promise-laden speech leaves China’s foreign, private firms ambivalent
Many analysts noted the GDP target was “ambitious” given the high base, lack of effective measures to turn around the faltering property sector and China’s increasing trade frictions with the United States and Europe.
“It is very likely that the announcements will disappoint the market,” said Ding Shuang, chief economist with Greater China at Standard Chartered.
“However, the government has reiterated several times that it will not launch a strong stimulus.”
Instead, the work report and the budget released by the National Development and Reform Commission on Tuesday signalled the government was doubling down on structural change, channelling more funds to the science and technology needed to make that wholesale economic transition.
“Beijing’s budget inclination on technology, education, national defence and agriculture is in line with its current moves to ward off external shocks and increase strategic investment,” Ding added.
‘Two sessions’ 2024: Premier Li Qiang decries ‘external interference’ in Taiwan
As its top task this year, Beijing vowed to modernise industry and develop “new quality productive forces” at a faster pace, a reference to sectors that depend on advances in science and technology, from new-energy vehicles to biomanufacturing and commercial space flight.
Emerging from the opening ceremony, Science Minister Yin Hejun said he welcomed the 8.1 per cent increase in national investment in research and development last year and called for more funding to spur innovation by young researchers.
According to the budget report, the central government will increase R&D spending by 10 per cent to 370.8 billion yuan this year and promote national champions.
The allocations align with a push for self-reliance on fronts from chipmaking to artificial intelligence to counter tech containment from the West and to wrest technological supremacy from the US, according to analysts.
“Recent experience surrounding the trade war and tech war versus the US has exposed China’s vulnerability to technology ‘choke points’, supply chain disruptions and probably intelligence theft, which alarmed leaders,” said Tianchen Xu, from the Economist Intelligence Unit.
“For technology in particular, policymakers’ anxiety is probably aggravated by recent advancements in generative AI, which created concerns that China might lag behind further in cutting-edge technologies.”
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Other elements of the work and budget reports – from expanding grain and energy reserves to creating more jobs and minimising risks from local government debt – reflect the leadership’s pursuit of stability, according to an economist from a leading university in Beijing.
“It suggests leaders are not very concerned with short-term economic problems. They are more troubled by longer-term challenges, posed by internal and external factors,” he said on condition of anonymity.
Huang Shouhong, director of the State Council Research Office, said the economic goals were realistic and achievable, though challenging.
“We have been going through all kinds of difficulties and gained rich experience [in managing the economy,” Huang said after the NPC opening.
“Our financial status is generally sound, with relatively large room to accommodate macro policies in the future.
“If unexpected events affect the economy, or unexpected changes happen to the international environment, there are reserved tools in our policy toolbox.”
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Also in the work report, the government raised opposition to “external interference” in Taiwan, which will inaugurate independence-leaning William Lai Ching-te as president in May. The island has long been a source of tensions with the United States, which is Taiwan’s primary supplier of arms.
On Hong Kong, Li said the principle of “patriots administering Hong Kong” should be firmly enforced. Beijing would continue to support the economic development of Hong Kong and Macau, and develop the Greater Bay Area, he added.
On Tuesday, the Hang Seng Index experienced its biggest fall since January 17, dropping 2.6 per cent, whereas China’s CSI 300 Index, which replicates the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, edged up by 0.7 per cent.
