China's Economic Agenda for 2024: Signals from the Two Sessions
9 key takeaways for macroeconomic policy from the Two Sessions congress
At the start of March, China held its Two Sessions (两会) congressional meeting – considered to be the most important annual event on the nation’s political calendar.
The Two Sessions are often viewed as rubber-stamp meetings that give perfunctory approval to political decisions made in advance by Beijing.
The event is nonetheless of critical importance for the Chinese central government when it comes to signalling its policy intentions across a broad range of areas.
What are the Two Sessions?
The term “Two Sessions” refers to the annual plenary meetings of the National People’s Congress (NPC), and the Chinese People’s Political Consultative Conference (CPPCC).
In nominal terms, the NPC and CPPCC are considered to be two of the highest authorities within the Chinese political system, and their annual meetings are comparable to the major congressional events of other countries.
The meetings customarily take place in March and run for a period of around 10 days.
What is the Government Work Report?
The Government Work Report (政府工作报告) is the key document released at each annual Two Sessions event, and is delivered at the very opening of proceedings by the Chinese Premier – a position currently held by Li Qiang.
The Report is the customary means by which Beijing announce its economic growth targets and plans for the year.
It is an essential document for understanding the outlook of China’s policymakers, and for this reason is subject to copious scrutiny and discussion by analysts, economists and social commentators both within and outside of China.
Economic targets for 2024
The Government Work Report for 2024 as delivered by Li Qiang on 5 March set the following economic targets:
GDP growth of around 5%.
CPI growth of around 3%.
New urban jobs of at least 12 million.
An urban surveyed unemployment rate of 5.5%.
All of these figures were roughly on par with the targets outlined by the Government Work Reports for each of the past several years since the start of the Covid pandemic.
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9 key takeaways from this year's Two Sessions
This year's Two Sessions set the tone for economic policy in 2024 across a range of areas. Here are nine key takeaways from this year's Two Sessions, based on information from both official government sources and leading domestic analysts.
Fiscal policy to stay active
The 2024 Government Work Report continued to make use of phrasing employed in previous reports concerning the need for active fiscal policy to support economic growth.
Luo Zhiheng (罗志恒), chief macroeconomist at Yuekai Securities, points out that China’s implementation of active fiscal policy in 2024 does not mark a departure from precedent, given that this has been the standard setting for policymakers since the Global Financial Crisis (GFC) over a decade ago.
Expansive monetary policy to follow the lead of fiscal policy
A key difference between China and other modern economies lies in the relationship between fiscal and monetary policy.
In representative democracies, monetary policy and fiscal policy are nominally subject to rigorous division. In China, however, they are both under the aegis of the State Council.
“The Report calls for strengthening policy coordination and cooperation, and strengthening the consistency of macroeconomic policy,” said Lian Ping, professor at Jiaotong University.
“Coordination is embodied by the tight coordination of fiscal policy and monetary policy...speaking specifically, this refers to a dual expansion of fiscal policy and monetary policy, and the joint forceful exertion of both.”
Beijing stresses reform of fiscal system
Reform of China’s fiscal system will continue to be a priority for central policymakers in 2024, particularly given the debt and risk issues created by the current system. He foresees a raft of further reforms to stymie regional debt risk.
In the Government Work Report for this year, Li Qiang referred to the need for “formulating and implementing a raft of plans for the resolution of government debt,” alongside the “category-based disposal of financial risk, and firmly guarding the bottom line against the onset of systemic financial risk.”
Launch of ultra-long-term treasury bonds
A landmark measure outlined by the 2024 Government Work Report is the introduction of “ultra-long-term treasury bonds” (超长期特别国债). This form of government debt will not be included as part of China’s fiscal deficit.
The bonds will have maturities of anywhere between 15 years to three decades, and are scheduled for issuance over at least each of the next three years.
2024 alone will see the issuance of 1 trillion yuan of ultra-long-term treasuries, contributing significantly to government debt in excess of the official deficit.
China to loosen municipal property restrictions
A key policy measure in 2024 will be further loosening of controls on property markets that were introduced by municipal governments around China during Xi Jinping’s second term in office.
The Government Work Report for this year makes specific reference to “reducing property restriction measures.”
Real estate think tank Ke’er Rui Research (克而瑞研究) interprets this as “loosening control measures in first-tier cities, and opening them up completely in second and third-tier cities.”
New quality productive forces
In terms of official policy rhetoric, a key development at the 2024 Two Sessions has been the introduction of the term “new quality productive forces” (新质生产力) as a key focus for economic policy in future.
Li Xiaohua (李晓华) from the Industrial Economic Research Institute of the China Academy of Social Sciences said to Securities Journal that Beijing’s focus on “new quality productive forces” would involve greater support from the state for R&D endeavours and the continued maintenance of strong industrial policy.
China seeks foreign investment
Beijing is especially concerned about attracting funds from offshore investors, after inbound foreign investment fell sharply last year.
Figures from the Ministry of Commerce indicate that in 2023, China’s actually used foreign capital was 1.13391 trillion yuan, for a year-on-year (YoY) decline of 8.0%.
The Government Work Report for 2024 signalled Beijing’s commitment to further opening up the Chinese economy and driving greater integration with global markets.
The Report called for “expanding high-level opening to the outside" and “expanding the intensity of attracting foreign capital.”
According to the Report, in 2024 China will “steadily expand systemic opening, continue to shrink the foreign investment entry negative list, and comprehensively cancel restrictive measures on the entry of foreign capital into the manufacturing sector.”
Economic recovery hinges on consumption
The 2024 Government Work Report stressed the need to increase consumption within China, while reports by state-owned media during the course of the Two Sessions congress referred to consumption as the “number one driver of economic growth.”
In the Work Report, Premier Li Qiang highlighted the necessity of “driving stable growth in consumption, reducing limitations by increasing income and optimising supply, and spurring potential consumption.”
“Following the trend of weakening global demand, the pace of China’s economic recovery will be determined by whether or not internal demand truly warms up again,” he said.
“Invigorating consumption has become the number one mission for the expansion of domestic demand.”
Greater credit support for private enterprise
The Government Work Report called for expediting the growth of China’s privately owned economy, with an especial focus on credit guidance to support small businesses.
The Report outlined a slew of key financial goals to this end, including raising the share of loans made to private enterprises by banks, and expanding the scale of bond issuance by privately owned companies.
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