Looking inward, Chinese Premier Li Keqiang focuses on the national bottom line

• Jobs, stability and risk control dominate the priorities for the coming year
• Tone shifts on Hong Kong, away from national security to integration in the Greater Bay Area

China unveiled a cautious and inward-looking government report for this year, putting the focus on the country’s bottom line as it confronts mounting external risks.

Addressing national legislators on Saturday, Premier Li Keqiang made no mention of the United States, Europe or Russia’s attack on Ukraine. Instead the emphasis was squarely on maintaining stability and risk control.

“We are very clear about the problems and challenges before us,” Li said to nearly 3,000 deputies as he delivered the annual government work report at the opening of the National People’s Congress at the Great Hall of the People in Beijing.

He said the world economic recovery was still shaky, commodity prices were high and prone to fluctuations, and China’s external environment was “increasingly volatile, grave and uncertain”.

In what is expected to be his final work report, Li stressed the importance of maintaining economic and social stability in the lead-up to the Communist Party’s five-yearly national congress this autumn, when the ruling party is tipped to reshuffle its leadership line-up.

In the report, the government set an economic growth target of around 5.5 per cent, the lowest in decades but a goal that would take “arduous efforts” to realise.
While the economy expanded 8.1 per cent last year, growth has slowed remarkably since the second half of 2021.

The growth target is in line with market expectations but many economists still expect China to miss it – Nomura economists estimate the economy to grow 4.3 per cent while Standard Chartered puts it at 5.3 per cent.

Another priority is employment.

Li said China would create more than 11 million urban jobs this year, keeping the urban unemployment rate under 5.5 per cent.

It will also extend tax and fee reductions to support manufacturing, smaller businesses and self-employed individuals, with tax refunds and cuts expected to reach 2.5 trillion yuan (US$395 billion) this year. The tax rebate for R&D spending by small and medium-sized enterprises will be raised from 75 to 100 per cent.

Local governments should do their best to create jobs, improve risk controls, and guard against a systemic financial crisis, he said.

Unemployment has become a big concern since the coronavirus and China’s stringent prevention measures dealt a heavy blow to private and small businesses, which employ more than 80 per cent of China’s urban workforce.

Controls would remain in place but Li suggested China would fine-tune its zero-Covid strategy. Local cases must be handled in a scientific and targeted manner, and the normal order of work and life should be ensured, he said.

According to the government finance report, China’s defence budget will increase 7.1 per cent to 1.45 trillion yuan (US$237 billion) to “deepen comprehensive combat readiness” from its military. China has maintained single-digit growth in its annual defence budget since 2016. Last year the defence budget grew by 6.8 per cent.

The work report’s reference to Hong Kong omitted last year’s tough line that the country would guard against interference from foreign forces and safeguard national security, opting instead to push for the city’s prosperity through better integration with the country.

Li said Beijing would uphold the “patriots-only” principle and maintain its commitment to the “one country, two systems” policy. He also reaffirmed Beijing’s commitment to the Greater Bay Area initiative, a project to turn Hong Kong and Macau, alongside nine other southern Chinese cities, into an innovation hub.

“We will help Hong Kong and Macau develop their economies and improve the well-being of their people, see that these two regions better integrate themselves into the country’s overall development, and maintain the long-term prosperity and stability of Hong Kong and Macau,” Li said.

The government report did not mention Hong Kong’s Covid-19 crisis, not surprising given the report would have been drafted at the end of the previous year, before the fifth wave of the pandemic hit the city.

On Taiwan, Li said Beijing would uphold the “[Communist] Party’s overall policy for resolving the Taiwan question in the new era” – a phrase President Xi Jinping introduced in November, suggesting a tougher stance and impatience with Taiwan. Beijing regards the island as a breakaway province that must be reunified with the mainland – by force if necessary.

Looking overseas, Li said China would stabilise foreign trade, make greater use of foreign investment and promote “high-quality cooperation” under the Belt and Road Initiative. “The vast, open Chinese market is sure to provide even greater business opportunities for foreign enterprises in China,” he pledged.

China would continue to pursue an independent foreign policy of peace, stick to peaceful development and safeguard world peace, he said, without referring to the week-old Russian invasion of Ukraine.

Russian President Vladimir Putin launched the full-scale invasion just weeks after Beijing and Moscow agreed to push forward their “strategic partnership without limits” and after the government report would have been drafted.

China has been trying to balance efforts to be “a responsible global power” with a growing alliance with Russia and ties with Ukraine – a key supplier of grain and corn which has also provided military technology to China.

China has so far refused to frame Russia’s aggression as an “invasion” or denounce Moscow.

George Magnus, a research associate at Oxford University’s China Centre, said: “No mention of the US, and Ukraine or others is I think steering well clear of highly sensitive ground about which China probably wants to remain silent for now, subject to what might be said in other ‘two session’ reports and speeches.”

“Strictly speaking, external influences on China could be deemed to be peripheral to the work report, but omission is I think a political judgment in current circumstances,” Magnus said.

“Li Keqiang gave these topics a wide berth, I imagine, because they’re both sensitive and impossible to evaluate honestly if the message to the party is one of stability and confidence. Both of these are emphasised frequently, and to admit that everyone faces uncertainty and instability is not on-message.”

Author: Jane Cai, SCMP