China’s new economic agenda looks a lot like the old one: takeaways

Beijing was abuzz with politics on Tuesday. China’s annual legislative gathering — the National People’s Congress, where Communist Party leaders promote their solutions to national ills — opened for business.

The event is a chance for leaders to set the direction of the economy and outline how and where the government will spend money in the coming year.

But while they aimed high, they offered little. Officials indicated they were not ready for dramatic steps to revive an economy ravaged by a real estate crisis, loss of consumer confidence and financial pressure from indebted local governments. Despite their reluctance to spend, China’s top leaders expect the economy to grow by about 5 percent this year.

The growth target and other policies were laid out in a report presented to the annual session of the Legislature. It was presented by China’s No. 2 official, Li Qiang, and is the culmination of a weeklong meeting dominated by officials and party loyalists.

Everyone agrees: the objective is ambitious.

There was one word that economists universally used to describe China’s 5 percent growth target: ambitious.

That would never have been the case. For decades, the Chinese economy has been synonymous with much higher growth, sometimes even double digits. But three years of strict pandemic restrictions took their toll, and a deepening real estate crisis has led to the collapse of dozens of developers. With insufficient action from Chinese leaders, some experts are now skeptical that China will achieve 5 percent growth this year.

“It’s not surprisingly an unrealistic set of targets,” said Logan Wright, director of China Market Research at Rhodium Group, a firm that specializes in China research.

It was still possible that the housing crisis would ease this year, Mr. Wright said, “but the policy measures outlined here won’t have much to do with it.”

Wait, no bazooka?

Some people believed – or at least hoped – that Tuesday’s reports would show that China is willing to take bigger steps to revive the economy, such as bailing out local governments, rescuing the real estate companies that haven’t collapsed, or by distributing alms to households. to stimulate spending.

Instead, the government said it would make a similar amount available as last year in the form of special bonds for local governments. No new measures for the real estate market were proposed and only the need to increase consumer confidence was discussed.

“They could have done more and the support could have been greater,” said Tao Wang, chief China economist at UBS. “They need greater explicit support from the central government,” she said.

Not only economists were disappointed. Investors who hoped China would bring in the big guns were also disappointed. In Hong Kong, where foreign investors can bet on China’s biggest companies, the Hang Seng Index fell 2.6 percent.

“Anyone looking for the policy bazooka will be disappointed,” said Andrew Polk, co-founder of Trivium China, a research and consulting firm. “But,” he added, “that die was cast some time ago.”

When it comes to the military, there is money to spend.

China’s top leaders outlined plans to expand military spending by 7.2 percent to about $231 billion by 2024. The percentage increase was the same as last year and continued a decades-long expansion of Chinese military spending, now the second largest in the world after the United States.

China’s spending on warships, fighter jets and other weapons is largely about projecting power in Asia, including by tightening the country’s grip on the disputed South China Sea and threatening Taiwan, the self-governing island democracy that Beijing says is his territory.

In his report to the legislature, Mr. Li reiterated China’s long-standing warning against “separatist activities aimed at ‘Taiwan independence,’” adding that Beijing would be “resolute in advancing the cause of the reunification of China.”

Mr. Li’s vague comments reflect how China’s leaders are waiting for Taiwan’s newly elected President Lai Ching-te to take office in May before considering major steps, including more military operations around the island, Ou Si-fu said. a researcher at the Institute for National Defense and Security Research, a Taipei think tank under Taiwan’s Ministry of Defense.

But China’s continued heavy spending on its military showed that Xi Jinping would continue to fight for potential conflict, if only to show Washington that it was serious about asserting its interests.

“Since the relationship with the United States is not good, China naturally cannot show too much weakness,” Ou said.

Come join us. Sorry, the press conference has been cancelled.

China invited journalists from all over the world and handed out visas that in most cases have become difficult to obtain. For many foreign correspondents, this year’s National People’s Congress marked the first time since the pandemic that the Chinese government allowed them to enter China to report.

Yet the party also made an abrupt change in the way it would communicate at the conference. On Monday it said it was scrapping a long-standing tradition: the prime minister’s press conference. It was one of the few opportunities for journalists to communicate with top officials. The decision to abolish the press conference, announced on the eve of the legislative conclave, was seen by many as another step away from transparency.