NPC Update: What Policy Themes Might Emerge?

Part of the

NPC Updates

series

Talking Points

  • The annual National People’s Congress (NPC) meetings – delayed since March due to the pandemic – will begin on May 22 in Beijing. The fact that the session will be held in-person is a milestone in China’s return to normalcy.
  • COVID-19 will dominate the agenda along with how to spur the economy, particularly getting consumer spending back on track and helping the small and medium-sized enterprises.
  • Most closely watched will be the setting of the economic growth target – a centerpiece of this meeting in normal times. We expect to see either a move away from setting the target or a lowering to potentially 3% – from the previous 6% target.
  • We will also be carefully watching personnel appointments, a key indicator of how President Xi is politically faring.
  • Other items on the agenda will be the marketizing of production factors, poverty alleviation, new infrastructure, and improving healthcare. Also noteworthy will be the advancing discussions on the 14th Five Year Plan (2021-2025).

What to Watch For

The annual meeting of the National People’s Congress, China’s 3,000+ member legislature, will start on May 22 in Beijing. Delayed from March this year due to the coronavirus, the scheduling of the session – and holding it in-person – is a milestone for China’s resumption of business and return to normalcy. There is, of course, a massive effort to ensure health and safety. In the lead up to this convening, all delegates were instructed to monitor their temperature beginning on May 6, two weeks prior to the meeting. The duration of the session has also been reduced to seven days from the typical 10 days.

Post-COVID recovery will dominate the agenda; however, we also predict the session will showcase President Xi Jinping and his handling of the virus. One indicator of his standing coming out of the COVID war will be the proposed personnel changes that always happen after the NPC meetings. Already, we have seen several of Xi’s allies put into key positions. Some of the more notable moves include:

  •  Ying Yong: Moved from Shanghai Party Secretary and placed in Hubei as Party Secretary, to manage the coronavirus outbreak at the source.
  • Gong Zheng: Moved from Deputy Party Secretary and Governor of Shandong, and placed in Shanghai as Deputy Party Secretary and Acting Mayor of Shanghai, to implement the integration Yangtze River Delta region, a key national strategy.
  • Li Ganjie: Moved from Minister of Ecology and Environment to replace Gong Zheng as Deputy Party Secretary and Acting Governor of Shandong Province.
  • Yin Hong: Moved from Shanghai Deputy Party Secretary and placed in Henan Province as Deputy Party Secretary and Governor to spearhead poverty alleviation and the war on pollution.

The Government Work Report, delivered by the Premier at the opening of the meetings, sets the tone for the legislative session and the year’s policy focus. This year, the report will include an overview of the economic health of the country, likely a victory lap on the government's containment of the coronavirus, and, perhaps most-watched, the setting of the economic growth target for the upcoming year.

One of the issues to watch will be if the target growth number is revised down from the goal of 6% or if China will take this opportunity to do away with this closely watched number. With last month’s announcement that China saw negative growth for the first time in four decades, it is unclear at this point how this all-important number will be handled. The IMF predicts China will only grow at 1.2% this year but could come roaring back next year with 9.2% growth. This assumes a lot of things, including positive global economic growth.

Other key happenings will include defense spending announcements, the release of the annual economic development plan, and the forecast report on the economy. There will be a list of laws for review and passage. And, the China People’s Political Consultative Congress (CPPCC) will meet concurrently, which is chaired by Vice Premier Wang Yang, the fourth-ranked Politburo Standing Committee member. With more than 2,000 members, the CPPCC is the other half of the “two sessions” that comprise the annual legislative meetings.

Policy Buzzwords

In the run-up to the Congress, the government has rolled out at least two new major policy themes that will anchor the policy proposals – and rhetoric – during the sessions.

  • Six Stabilities & Six Ensures: In mid-April, the Politburo met and for the first time outlined the “six ensures”, which reinforce the “six stabilities” they have been discussing for the past year. Taken together, this is intended to elaborate the framework for the government's current agenda. According to Bill Bishop of Sinocism, the “ensures” are a good indicator of what is most worrying to China’s leadership.

                              •   Six Ensures: employment, basic livelihood, market players, food and energy security,

                                    supply and industrial chain stability, functioning grassroots institutions

                              •   Six Stabilities: employment, finance, foreign trade, foreign capital,

                                    investment, market expectations

  • Marketizing Production Factors:Also in mid-April, the Chinese Communist Party Central Committee and the State Council issued a directive, called the Guidelines on Improving Mechanisms for Market-based Allocation of Production Factors, outlining how the free market will play a more important role in the allocation of the inputs for production – land, labor, capital, and data (a new addition). This is now a part of the relief package aimed at stimulating the economy as it reopens for business after the impact of COVID-19. While not garnering much attention outside of China, this plan is a potential roadmap for significant reform of China’s economy. Many of these proposed reforms have been debated for decades, but the economic impact of the virus may create renewed political will to move forward. If successfully implemented – which is a big IF– these changes would be transformational for the Chinese economy

Potential Topics and Legislation

Speculation has begun about what topics will lead the session and the agenda will be lengthy. Here are some potential themes that are likely to emerge:

1.    Restarting the Economy

  • Post-epidemic stimulus and economic policies to restart the economy, particularly boosting consumption, addressing unemployment, and resumption of work  
  • How to weather the global recession    
  • Moderately relax monetary policy and improve private business financing, particularly for small and medium-sized enterprises
  • Advance the 14th Five-Year Plan (2021-2025)
  • Production factor reform
  • Industrial transformation and upgrades and enhance independent innovation capacity
  • Proactive fiscal policies

2.    Healthcare Upgrades

  • Epidemic prevention and control
  • Plans to improve public health
  • Potential legislative amendments to public health laws

3.    IP Rights Protection

  • Adopt legally-binding IP penalties
  • Update intellectual property laws, including patent, copyright, and criminal law

4.    Cybersecurity & Data Policy

  • Two new laws: Personal Information Protection Law and Data Security Law

5.    New Infrastructure

  • Accelerate the build-out of 5G, cloud storage, NEV charging stations, Internet of Things, and other new tech
  • Promote digitization and e-commerce

6.    Export Controls

  • Long under consideration, the Export Control Law is not expected to pass, but could be reviewed, particularly in light of significant U.S. actions on export controls

7.    Poverty Alleviation & Rural Revitalization

  • Updates and action on poverty alleviation targets; the goal was to eliminate extreme poverty by 2020

8.    Ecological & Environmental Protection

  • Support for blue skies, green water, and clean land
  • Bio-safety
  • Promote green agriculture

Sources: Sina, Global Times, Gov.CN, Reuters, US-China Business Council

By

Basilinna

|

May 15, 2020

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