Global Perspective – Quick take on the National People’s Congress of China

Eylem Senyuz 

Director, Global Macro Strategist

Truist Advisory Services, Inc.

What happened

The National People’s Congress (NPC), the most critical policy meeting in China, was a virtual event because of the COVID-19 outbreak for the second straight year. China’s political and military leadership finalized goals for economic variables and announced key foreign policy directives.

"China’s ultimate goal of not relying on the external markets for technology is expected to be achieved by increasing R&D spending faster than the average GDP growth rates."

Highlights

Economic agenda – the growth rate target is back but with a conservative touch  

Last year during the heights of the pandemic-related uncertainty, China dropped the official economic growth rate target for the first time. Many applauded the move, suggesting that the country is moving in the right direction by allowing market forces to determine the economic growth rate. Unfortunately, that only lasted for a year. Li Keqiang, Premier of the State Council, announced that the country aims for “at least” 6% growth in 2021, a much more conservative rate of growth than the consensus estimates of 8.4%. Nevertheless, that rate is still in line with the original target of doubling the Chinese economy by 2035. The country’s fiscal deficit target will be 3.2% of GDP, indicating lower deficit spending versus last year’s 3.6% deficit target, but higher than the anticipated figure of 3%. Urban job creation is expected to accelerate with at least 11 million new jobs targeted, well over the previously announced target of 9 million. 

Ambitions in high-tech sectors

The previously-announced grandiose plans “Made in China 2025” and “China Standards 2035” that were reiterated in the 14th 5-year plan were also referenced during the NPC as well. China’s ultimate goal of not relying on the external markets for technology is expected to be achieved by increasing R&D spending faster than the average GDP growth rates.

Only “patriots” to rule Hong Kong 

Deng Xiaoping, China’s transformative policymaker in the 1980s, coined the term “patriots governing Hong Kong.” According to Deng, a majority of the city’s administrators should fully endorse China’s exercise of sovereignty over Hong Kong and should not intend to destabilize China and its economic development. President Xi Jinping reiterated this concept last month before the NPC and the NPC highlighted proposals in the works to implement the principle of “patriots governing Hong Kong."

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