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China People's Congress

Five things to expect from China's top political meeting

Slowing growth and geopolitical tensions to dominate discussions at the NPC

Chinese President Xi Jinping speaks at the closing session of last year's National People's Congress at the Great Hall of the People in Beijing.

BEIJING -- China convened on Sunday its once-a-year meeting of the country's two top political bodies to set the nation's direction for the coming year.

The country's foremost political advisory body, the Chinese People's Political Consultative Conference, kicked off the nearly two week-long meeting, preceding the National People's Congress on Tuesday. Some 5,000 delegates from around the country, including the special administrative regions of Hong Kong and Macao, are gathering at Beijing's Great Hall of the People for the largely rubber-stamp legislative sessions.

The meetings come as the world's second-largest economy is beginning to lose steam amid lingering tension from the trade war with the U.S. and slowing domestic consumption.

Here are some of the issues that are expected to dominate discussions:

Economic slowdown

Analysts expect China to pare its gross domestic product growth target to somewhere between 6.0% and 6.5%, following last year's 6.6% -- the lowest rate since 1990.

Economists at Morgan Stanley believe lawmakers will continue to adopt pro-growth measures, expecting a 1.6 trillion yuan ($240 billion) fiscal stimulus package in the form of tax cuts and bond issuance. The steps are likely to push the budget deficit-to-GDP ratio to at least 2.8%, up from last year's 2.6%.

The central bank is likely to further cut the required reserve ratio to allow local banks to provide more lending and deal with bad loans, said Enodo Economics. Even so, the China-specialized advisory company expected no change to the benchmark lending rates.

Trade war with the U.S.

The two countries have been embroiled in a trade war since last July, imposing higher tariffs on each other's imports. The U.S. postponement of the March 1 deadline for an additional levy on $200 billion worth of Chinese goods provided some respite ahead of the meetings, giving the Chinese leadership time to address concerns about its drag on growth as the conflict becomes more prolonged.

Ahead of a possible leader summit at the end of March, China may highlight recently announced draft laws on foreign investments and patents to placate issues raised by the U.S. on intellectual property and technology transfers.

Pan-Asia consultancy Dezan Shira & Associates ruled out an all-out economic war, preferring the possibility of both countries conceding on market access, with China accommodating a more level playing field for foreign investors.

But in any case, the Hong Kong-based professional services provider said the U.S.-China tariff war has set a "new reality" in international trade relations, advising businesses that relied on China for sourcing and production to brace for "tighter regulatory oversight" and rising costs.

Confidence-building

The annual double meetings, commonly known as lianghui in China, give the country's communist leadership the opportunity to reaffirm power. All eyes will be on President Xi Jinping, and how he will evaluate China's position and outlook ahead of the country's 70th independence anniversary on Oct. 1.

Apart from its growth slowdown, China has been grappling with allegations that its companies, including Huawei Technologies, pose a security threat, while its Belt and Road Initiative to build infrastructure projects in developing countries has been creating debt traps for their recipients.

While Xi is not expected to speak at this year's meetings, he will likely use the occasion to reaffirm his political ideology, consolidating power at the party level in return for promises of a stronger and more prosperous China.

Reform

The urban-rural development gap will occupy discussions at the sessions, with possible rollouts of reform initiatives on land ownership to spur agricultural productivity. Analysts said the introduction of a property tax to stem speculative buying remains out of sight in consideration of the middle-income group. Instead, the government will likely cut taxes to boost the spending power of the people.

To address imbalances and for long-term growth, state-owned bank ICBC said in a recent research report that the country needed to shift its industrial development policy by expediting a high-end manufacturing and service sector upgrade through artificial intelligence.

Foreign policy

The backlash against some of China's BRI projects, in particular those in Malaysia and Sri Lanka, and the militarization of the South China Sea will likely be among the issues discussed by policy makers in Beijing. The current tense relations with Taiwan, which Beijing views as a renegade region, are also likely to part of the agenda.

The recent failure of the U.S. and North Korea to reach a deal on the denuclearization of the Korean Peninsula may also hog headlines at the NPC. China is a close ally of North Korea, which seeks Beijing's endorsement for a "comprehensive solution," part of which is to demand the U.S. remove sanctions.

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