Restoring Economy and Defusing Risks: Reviewing China’s Two Sessions

By Yuxi Nie

Restoring Economic Growth

As the previous blog mentions, due to the various challenges Chinese societies are facing, with internal economic and political imperatives, Chinese policymakers are more than ever determined to carry out distinct sets of economic goals in the near term. In 2023, economic and social matters at various levels are prioritized in the agenda. With the revived activities of Chinese private companies, we can expect the supply chain and trade to form new patterns. 

In March 2023, China held its annual parliamentary meetings, also named “the Two Sessions”. They refer to the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference. The Two sessions have laid out the government’s overall vision and the country’s social, economic, industrial, and diplomatic policies. 

During the March gathering, China’s policymakers announced the country’s main target in 2023. Much economically driven, these targets include the gross domestic product (GDP) growth of around 5 percent, providing around 12 million new urban jobs, growth in personal income, etc.  

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Defusing Risks 

China’s Two Sessions have demonstrated that the central government leaders are highly aware of the challenges ahead for the country’s social and economic development. In a government work report, China’s former Premier Li Keqiang identifies the various imbalances and inadequacies in the country’s development, among which the first are insufficient demand in the domestic market, unstable expectations from private investors and businesses, and the daunting task of ensuring employment stability.

To defuse potential risks in the current financial and political system, Chinese policymakers aim to find measures to reset market sentiments and ensure stability and growth in a competitive economy.  Furthermore, they stress that China has to continue improving its capacity for scientific and technological innovation. Domestically, it means China continues to reform and sees that businesses fulfill both their economic and social responsibilities. Externally, in order to attract foreign investment, China aims to focus on these aspects: 1) expand market access, 2) continue to open up the modern services sector, 3) improve its economic and trade agreements, 4) leverage the role of imports and exports in driving economic growth, 5) improve services for international businesses and 6) facilitate the launch of landmark internationally funded projects. 

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The global economy unfolds more intensified competition among major players from different world regions. As the previous blog mentions, increasingly emphasizing its centralization, China has entered a new phase to establish its self-reliance in the midst of global disruptions.

With the prioritized internal and external economic measures during the sessions, what could be the implications for the international businesses between China and Europe? In an interview with Mr. Roland Brouwer, the regional director of BIPO, he mentions that China’s reopening from Covid Zero travel restrictions and the recently held Two Sessions certainly demonstrates the policymakers’ willingness of moving forward with the country’s economy and continuation of international trading. However, Mr. Brouwer argues that it would take years to rebuild the trust relationship for international businesses between China and Europe since reaching mutual rules and agreements is more than ever needed for a level playing field in the long term. 

It is still too early to tell about the future. We need to see if the government leaders can come up with a model to work things out. CAI, the halted EU China Comprehensive Agreement on Investment, would have been the way forward since we would then look at the proper model. In the broader context of deglobalization, we need to sort out ways to benefit people by sharing trade benefits.

Roland Brouwer, Regional Director (Europe) Corporate & International Relations at BIPO, 2023

Reshuffle and Reformations

The Two Sessions have also witnessed a reshuffle of the appointed high government roles, with the most noteworthy being that the former Communist Party Chief of Shanghai, Li Qiang, was appointed to be the new premier. Known for his pragmatism, Li is carrying out important tasks to revive China’s economy and boost confidence among private sectors and foreign investors, especially after the market sentiments were much affected due to the country’s Covid-zero policies in the last three years. 

Commenting on the new Premier Li Qiang’s press conference, Chinese experts argue that as a growing economy, China seeks to maintain a stable external environment for growth, and China is not willing to decouple from the US unless being pushed. 

From his (Premier Li Qiang) point of view as the premier, diplomacy should be a task that serves the economy.

Lu Xiang, US-China relations expert, Chinese Academy of Social Sciences, South China Morning Post, 2023

During this gathering, the parliament has also approved the biggest government reorganization since 2018, with the reformation of a new financial regulatory body, a national data bureau, and a renovation to the science and technology ministry. With the changes to the national financial regulatory administration, it is for the financial regulation to be under one government body, rather than across different institutions. 

The China Securities Regulatory Commission will be changed from a public service organ into a full fledge committee under the State Council. This change is meant to ensure more streamlined decisions making in the future creation and enforcement of rules. 

The new National Data Administration of which will drive toward building a more data-driven economy. Under the support of the National Development and Reform Commission, China is to centralize the system to “coordinate and promote the development of basic data systems” and “coordinate the integrated sharing, development and use of data resources”

Lastly, the Ministry of Science and Technology is removing many non-core units in order to streamline the leadership and management of China’s science and technology system. Such reorganization also looks into the US-China technological rivalry, by which, Chinese policymakers are looking into ways in China’s ability to seek technological breakthroughs such as in chip-cutting technology and machinery. Chinese President Xi has stressed that China should achieve self-reliance and strength in science and technology. Prompted by the shifting of global circumstances, the reorganization of the Ministry of Science and Technology in fact reflects the growing tension between China’s economy and its trading partners in the West. 

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