China Lawmakers Wrap Whirlwind Session Focused on Managing Risks
(Bloomberg) -- China will bring its biggest annual political gathering to a close, with Premier Li Keqiang’s once-a-year news briefing in focus, along with a series of votes on Hong Kong that could stoke tensions with the West.
The National People’s Congress will approve measures to overhaul Hong Kong’s election system and a policy blueprint designed to reduce China’s technological dependence on the U.S. in a closing session set for 3 p.m. Thursday in Beijing. Shortly thereafter, Li will discuss everything from economic growth to financial markets in one of the rare occasions when a top leader of the world’s second-largest economy takes questions from the media.
The NPC gathering -- condensed into half its usual two-week length due to coronavirus restrictions -- showcased President Xi Jinping’s confidence after China emerged from the pandemic as the only major economy to expand in 2020. Over the past week, the government has laid out ambitious plans to overtake the U.S. in research-and-development investment and shift its capital-intensive growth model toward services and consumer spending.
“At the forefront of China’s economic plans presented at the National People’s Congress is increased technological self-sufficiency,” Xiao Chun Xu, assistant director and economist at Moody’s Analytics, said in a note Wednesday. “China also wants to solidify its position as the world’s manufacturing powerhouse and seeks to be more integrated with the world, including trade in services.”
The CSI 300 Index jumped as much as 2.7% before the NPC’s closing session, setting itself up for its first back-to-back advance in a month, amid calls for calm in the media. Gains were broad based with all 10 sectors rising, led by consumer staples and materials shares.
The decision to curb the influence of Hong Kong’s pro-democracy opposition in future elections demonstrated Xi’s willingness to disregard Western pressure in order to address perceived domestic threats. Although details of the legislation remained unknown hours before the vote, it would require candidates for elected office to be “patriots,” which one senior diplomat in Hong Kong said included “respect” for the ruling Communist Party.
The election measure was one of several signs during the NPC that Xi was focused on managing risks at home before a key party meeting next year that could decide whether he stays on for a third five-year term as leader. Plans expected to be approved by lawmakers Thursday call for stronger national security legislation and expanded measures to counter U.S. sanctions.
The government’s modest growth target of “above 6%” for the year was also well below the 8.4% expansion that economists predict. The conservative figure was seen as a way to give officials more space to focus on longer-term ambitions, like developing hi-tech industries and supporting consumer spending.
At the same time, Beijing plans to bring down the budget deficit to 3.2% of gross domestic product. Officials are worried about the build-up of debt and asset bubbles, and want to rein in the fiscal and monetary stimulus unleashed last year when the country became the first in the world to go into lockdown.
“China’s sober and flexible 2021 GDP target is a game-changer,” Shaun Roache, chief economist for Asia-Pacific at S&P Global Ratings, wrote in a note. “As China rebalances and resets, the rest of the world will have to adjust.”
©2021 Bloomberg L.P.