National Congress of the Communist Party of China
CHINA'S BOLD ECONOMIC PROGRAM AFTER 2024
Last Tuesday, March 5, investors, bankers, analysts and media specialized in economics and politics closely watched the annual meeting of China's National People's Congress, where the country's parliament sets economic priorities from the current year 2024. A Gross Domestic Product (GDP) growth target of "around 5%" (with a Consumer Price Index of around 3%) was announced, as well as an unemployment rate of 5.5%, as the country aims to create more than 12 million new urban jobs. While the audacious growth target was kept at the same level in 2023, this time there are additional hurdles to consider, including concerns about domestic demand and deflation, a housing crisis, demographic challenges and a falling stock market.
"It is not easy for us to achieve these targets," Premier Li Qiang told the nearly 3,000 delegates at the Great Hall of the People in Beijing. "We need political support and joint efforts from all fronts."
So how does the world's second-largest economy plan to make this happen, especially with higher base number comparisons? While the prime minister's traditional press conference was canceled this year, there were references to policies that support the birth rate, stabilize housing projects and harness "new productive forces" for industrial capacity. More importantly, China will lift all restrictions on foreign investment in the manufacturing sector and "pool its strategic scientific strength and non-government innovation resources to achieve breakthroughs in core technologies in key fields." Contrary to some expectations, no stimulus measures were unveiled at the meeting, but a government work report revealed plans to issue 1 trillion yuan ($139 billion) in ultra-long special bonds for major projects not included in the budget.
It mentioned some specific industries for innovation, including "new energy automobiles" and "new materials," and noted development plans for quantum computing, big data and artificial intelligence. It is part of a drive for self-reliance in which the central government spent 3.3 trillion yuan ($417 billion) on research last year, or about 2.6% of total GDP. The U.S. has been playing a similar game with the CHIPS and Science Act and the Inflation Reduction Act, which pumped hundreds of billions of dollars into key industries in the name of national security and competitive advantage, as well as restricting high-tech chips to China and imposing serious export controls.
But there is one sector to which the president of the People's Republic of China has assigned a critical task that blends business and tradition. Bankers in the Asian giant are facing new orders: to develop a "financial culture with Chinese characteristics".
This ideological campaign emphasizes iron self-discipline and strict external regulation for financial institutions to serve the cause of "high-quality development.
A short phrase that describes a drive by Xi Jinping, the supreme leader, to turn China into a high-tech, low-carbon industrial superpower. On the road to achieving this goal, Xi has made it clear that central planners andstate-owned enterprises will play a leading role.
Foreign investors could be understood for worrying that the whole country is taking asharp left turn, as if their Chinese counterparts were showing up to their next meeting dressed in Mao suits.
But China's leader is looking even further back to inspire his country's development today.
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