China Leadership Gathers as Economic Challenges Mount

China’s annual parliamentary pageant — the National People’s Congress — opens Saturday in Beijing, bringing President Xi Jinping one step close to a precedent-defying third term in power. Amid the pomp and propaganda at the Great Hall of the People, the Communist Party leadership will lay out policies to address the country’s biggest challenges, such as rebuilding growth slowed by Covid. The 3,000-or so deputies always give their ceremonial seal of approval to everything proposed, but that doesn’t mean there isn’t drama. A property slump, a war in Europe and a Covid surge in Hong Kong leave lawmakers plenty to chew on.

1. What’s the meeting for?

While the party calls the shots in China, the NPC gives its proposals the force of law. The event has also for decades provided the world’s best chance to see China’s leaders in action, with Premier Li Keqiang outlining key policies in a speech and conducting what is often his only news briefing of the year. Xi has increasingly sought to use the NPC to further legitimize policy decisions, leading to some dramatic votes in recent years. In 2018, the body voted almost unanimously to lift limits on the president’s term, and in 2020 passed a resolution calling for a sweeping national security law in Hong Kong. The NPC runs alongside the Chinese People’s Political Consultative Conference, an advisory body of people from the arts, business and legal worlds, as well as party delegates. Together, they’re known as the Lianghui, or “Two Sessions.”

2. What’s on the agenda?

Besides any discussion of the turmoil resulting from Russia’s invasion of Ukraine, Chinese lawmakers will release the country’s latest economic goals and fiscal spending plans Saturday. Leaders signaled the need to address “contraction of demand, supply shocks and weaker expectations” during their Central Economic Working Conference in December. Boosting consumption, easing credit supply, expediting infrastructure investment, addressing growth gaps and tweaking a “Covid Zero” strategy that frequently plunges cities into lockdown will be the main ways to lift the economy, BNP Paribas SA analysts Xd Chen and Jacqueline Rong wrote. Foreign Minister Wang Yi was expected to address hot button issues such as Ukraine and U.S. support for Taiwan during his annual news conference Monday. Xi will likely use the biggest event on China’s political calendar before a twice-a-decade party congress later this year to further shore up support.

3. Who’s coming?

NPC deputies and CPPCC members have one thing in common: They need the party’s blessing to be there. Attendees include Xi and his six fellow members of the Politburo Standing Committee, other party and government leaders, company executives and military commanders. Hui Ka Yan, chairman of the world’s most-indebted property developer, Evergrande Group, could skip the CPPCC meeting, or even be ousted from the body. For the third year straight, there will be no foreign journalists flying in to mingle with masters of the world’s second-largest economy due to Covid curbs. Only some Chinese and foreign journalists based in the capital will attend, and from a satellite location miles away. Hong Kong leader Carrie Lam has turned down her invite to focus on the city’s virus surge. About a dozen of the city’s 36 NPC deputies had their trip to the capital thwarted when one in their group tested positive for Covid during their two-week quarantine in Shenzhen, causing him and close contacts to remain in the southern Chinese city, the South China Morning Post reported.

4. What is Xi facing going in?

Xi must overcome several crises on his path to the party congress, where the ruling party traditionally reshuffles its leadership line-up. The debt-ridden housing sector has crashed, causing companies to default and sales to slump, tighter regulation of the tech sector has wiped out billions in stock market wealth and efforts to cut carbon emissions have hit the economy. Covid Zero controls have all but shut the nation’s borders and stifled consumption. Moreover, the country’s birth rate is tumbling, and women’s rights issues keep flaring up. Internationally, Xi’s decision to publicly join hands with President Vladimir Putin at the Beijing Winter Olympics weeks before the invasion of Ukraine has led to calls for China to show it supports the independence of smaller nations.

5. What about the economy?

The fiscal and economic projections released on the NPC’s opening day are some of the most anticipated indicators of the direction of China’s economy. Last year, the government’s target of “above 6%” growth in gross domestic product fell short of the 8.4% increase predicted by economists, as China prioritized reducing debt levels and encouraging innovation over growth. This year, Beijing was likely to set a growth target of between 5% and 5.5%, BNP Paribas analysts said.

Author: Jenni Marsh, Bloomberg