The week-long second session of the 14th National People’s Congress in Beijing last month will shape the government’s policy agenda for the upcoming year. The prominent annual political event, known as the Two Sessions, brought together around 3,000 delegates from across the country. It provided insights into the overall fundamentals of the Mainland economy, and shed light on the direction and focus of China’s future development.
Ambitious Economic Targets
During the meeting, Premier Li Qiang delivered his inaugural government work report, in which he unveiled a relatively ambitious economic growth target of around 5% for 2024 – identical to last year’s target. Despite achieving 5.2% real GDP growth last year, attaining 5% this year poses a greater challenge due to a higher base number, compounded by China’s sluggish post-Covid recovery, challenges in the property sector, dampened confidence, and deflationary pressure.
Li acknowledged the rocky road to economic recovery post-pandemic, and highlighted the adverse effects of the global environment on the country’s development. He emphasized the importance of a “proactive” fiscal policy and “prudent” monetary policy in response to these circumstances.
Nonetheless, the ambitious target indicated that the top leaders are committed to supporting economic growth. Despite the absence of a large-scale economic stimulus plan, the Central Government has taken the market by surprise with its pledge to issue ultra-long-term special treasury bonds for several years in a row, starting from RMB 1 trillion in 2024. This unexpected step sends a positive signal, indicating the Government’s proactive role in stimulating investment, and is anticipated to bolster market sentiment.
New Quality Productive Forces
The government work report outlines the 10 major tasks for 2024, with the first task highlighted as “striving to modernize the industrial system and developing ‘new quality productive forces’ at a faster pace”. The term "new quality productive forces,” first introduced by President Xi Jinping last September during an inspection tour to Northeast China, refers to “advanced productivity that is freed from traditional economic growth mode and productivity development paths, features high-tech, high efficiency and high quality.”
Mentioned for the first time in the report, it is evident that it has taken a prominent position in China’s economic agenda. This signifies a concerted effort by the Mainland to enhance the breadth and depth of in developing high-tech industries. More resources will be allocated to technological innovation and advanced manufacturing, particularly in areas such as artificial intelligence, big data, new energy vehicles, and other related sectors.
Further Opening Up
While many areas of China’s economy rebounded in 2023 due to the great reopening, foreign investment remained sluggish. The latest figures released by the State Administration of Foreign Exchange showed that China’s foreign direct investment significantly declined by 82% year-on year to US$33 billion on the net basis in 2023, marking the lowest level since 1993.
Against this backdrop, the priorities of boosting trade and attracting foreign investment remain at the forefront of the policy agenda. The Central Government has announced it will further shorten its negative list for foreign investment. Specifically, it will remove all market access restrictions in manufacturing fields and relax market access for telecommunications, medical and other service industries. It will also expand the Catalogue of Encouraged Industries for Foreign Investment and encourage foreign-invested enterprises to reinvest earnings in the country. With these concerted efforts to attract foreign direct investment, it is anticipated that FDI inflows into China will rebound in 2024.
Hong Kong as a Bridge
The Two Sessions have emphasized the importance of technological innovations in China's economic progress. In the months ahead, ministries and local governments will work towards formulating policies to effectively implement the ambitious modernization agenda outlined during the meetings.
In line with these efforts, Hong Kong has been actively promoting the development of innovation and technology on all fronts. In his recently announced Budget, the Financial Secretary unveiled plans and measures to expedite the development of artificial intelligence, life and health technology, green technology, and more. It is crucial for Hong Kong continue playing its role as a bridge, facilitating investment and fostering collaboration between the Greater Bay Area, the Mainland and other regions.
Doris Fung, [email protected]