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China People's Congress

China plots post-COVID recovery at NPC: Five things to know

Congress expected to discuss Hong Kong while deliberating growth targets

A souvenir cup featuring a portrait of Chinese President Xi Jinping is displayed at a shop March 1, ahead of the National People's Congress in Beijing.   © Reuters

SHANGHAI -- China's National People's Congress looks to pave the way for a post-COVID-19 recovery and a return to normal economic policies when the annual meeting of the country's parliament begins Friday.

The gathering will be preceded Thursday by the start of the Chinese People's Political Consultative Conference, an advisory body. Both sessions will highlight China's medium- and long-term plans toward achieving a developed economy by 2035.

Delegates to the NPC in Beijing will deliberate the annual government work report, which outlines policy directions, and approve China's fiscal budget for 2021 as well as the country's 14th Five-Year Plan covering 2021-25. They will take guidance from policies approved by the Chinese Communist Party's Central Committee in October, focusing on innovation-led development, urbanization, job creation and a greener economy.

The weeklong sessions will be attended by President Xi Jinping along with around 5,000 delegates known as deputies. This year's gatherings come ahead of the CCP's 100th anniversary in July, an occasion to mark the party's ideological achievements.

China's leaders face a new U.S. government under President Joe Biden that shows little sign of easing ongoing tensions with Beijing, as well as growing scrutiny by an international community that looks to hold Beijing responsible for its human rights record and superpower ambitions.

Here are some highlights to expect from the two sessions:

What is China's 2021 GDP growth target?

China's new five-year economic and social development plan begins a three-stage push to double the nation's gross domestic product by 2035 compared with 2020.

Growth indicators will be crucial to ensure targets are met, but some economists do not expect Premier Li Keqiang to announce the GDP target for 2021 when delivering his government work report Friday. Li skipped a similar announcement at last year's congress in May following a sharp dip in first-quarter GDP. China's economy expanded in subsequent quarters to achieve growth of 2.3% for the year.

"Setting something closer to the pre-pandemic trend of around 6% would be aiming too low, and financial markets could read it as a sign of significant tightening to come," Societe Generale wrote in a research report Friday. But if Chinese leaders set something "notably above 7%," then "local governments might take it as a sign of encouragement for stimulus."

Economists at the French investment bank expect growth of 8% to 9% from the low base line of 2020.

But China Renaissance Securities projects that growth will return to the pre-pandemic level of 5.5%-6% over the next five to 10 years before decelerating to 5.0%-5.5% to meet high-quality growth.

What will be the focus of China's economic policy?

Though China reports no community infections since Feb. 7, many neighboring economies are not out of the woods yet.

Beijing will focus on policy normalization, said China Renaissance, removing some fiscal stimulus measures but maintaining tax exemptions and targeted fiscal support to fix an uneven jobs recovery, soft income growth and lagging consumption.

The research firm also projected that China's budget deficit will be trimmed to 3% of GDP, from 3.6% targeted for 2020.

Will technology investment remain relevant to long-term goals?

China, under the 2021-25 Five-Year Plan, envisions joining the club of developed countries by 2035, on the way to the Communist Party's goal of achieving a "great modern socialist country" in 2049.

The plan will be driven by Beijing's "dual circulation" strategy aimed at softening the impact of trade and technology sanctions imposed by the U.S. Economists expect detailed policy documents designed to generate domestic demand and improve productivity through innovation with the support of foreign direct investment.

"We believe these initiatives, if rigorously executed, will mitigate structural drags from an aging population and deglobalization," Morgan Stanley said in a research report Feb. 24.

Continued attention likely will be given to science and technology to ensure China's lead in artificial intelligence, 5G communications, electric vehicle development and quantum computing. China's research and development spending rose in 2020 to a record 2.4% of GDP, or $377.7 billion, as the country has ranked second after the U.S. since 2013, according to official data.

The congress is expected to dole out plans for achieving Beijing's target of reaching peak carbon emissions by 2030 and decarbonization by 2060.

Will the NPC take further action on Hong Kong after the national security law?

Deputies may discuss electoral reforms for Hong Kong, which is expected to hold Legislative Council elections in September. Last year's congress surprised many by enacting a national security law covering Hong Kong that took effect July 1.

Xia Baolong, head of the Hong Kong and Macao Affairs Office in Beijing, attended a two-day meeting last month with officials from the territory to discuss "imminent political reforms," according to Global Times, a Communist Party-affiliated newspaper.

Risk advisory firm Eurasia Group said new electoral reforms in Hong Kong may be drafted after the NPC, and they would emphasize the notion of "patriotism."

"The bottom line is that Beijing will likely make electoral reforms to guarantee pro-establishment victories in future votes and prevent local authorities from having to intervene to disqualify or dismiss opposition figures," wrote Michael Hirson, Eurasia's practice head for China and Northeast Asia.

What will Beijing convey in terms of diplomacy?

Li and Foreign Minister Wang Yi typically meet the press at this yearly gathering to give their thoughts on economic, social and international issues. Chinese officials including Wang have repeatedly urged the Biden administration to resume bilateral cooperation, but they rebuke issues raised by the international community regarding Hong Kong, Taiwan and the plight of ethnic Uyghurs.

NPC attendees may reiterate Beijing's hope for international collaboration, including the distribution of vaccines, but chastise foreign governments for meddling in China's internal affairs.

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