Reviving economy the focus of China's parliamentary meets

Discussions over how to save and create jobs and boost investments will dominate the week. PHOTO: AFP

BEIJING - After more than two months of delay thanks to the coronavirus outbreak, China's biggest political event kicks off on Thursday (May 21) with salvaging the country's bruised economy top on the minds of its leadership.

Discussions over how to save and create jobs and boost investments will dominate the week, even as 5,000 delegates from around the country practise safe distancing at the annual parliamentary meetings, which have been shortened from the usual 10 days to a week.

Some 2,000 representatives from various political parties and sectors of society will attend the Chinese People's Political Consultative Conference starting on Thursday, where proposals - a significant number of them coronavirus-related - by these political advisers will be discussed.

On Friday morning, Premier Li Keqiang will present his work report at the opening of the national legislature National People's Congress (NPC), and it will be watched for whether there will be a more modest growth target for the year, as well as widely-expected economic stimulus plans.

Analysts believe China will not set a gross domestic product (GDP) growth target this year, given the uncertainties in the economy and worries of another wave of outbreak.

As countries around the world face similar uncertainties in their economies and are still in the thick of battling the pandemic, it would be difficult for China to accurately forecast its own growth.

"To do this will require accurate forecasts on the policy effectiveness on all major economies," said chief economist Iris Pang from ING Bank.

"It is, therefore, impractical for the government to write down a growth target. It is also difficult to set an unemployment rate target like last year, but easier to set an inflation target."

The government may instead set a range of 2 to 4 per cent or 3 to 5 per cent, said analysts. Before the coronavirus outbreak, economists had expected Beijing to set a target of around 6 per cent for this year.

But the economy contracted 6.8 per cent in the first three months of the year, the worst on record.

The Politburo, the Communist Party's top decision-making body, said in March it would revise up China's budget deficit and issue special treasury bonds to help prop up the economy.

Economists predict the budget deficit ratio could be raised past the long-standing red line of 3 per cent, to possibly 4 per cent.

Without an expressed GDP figure, local governments will lack specific guidance on the economic targets they need to achieve.

But economics professor Li Wei of the Cheung Kong Graduate School of Business argued that there needs to be an alternative key performance indicator for local governments instead.

"If we can simultaneously shift the incentive for local governments from developing their economies to providing public goods, that would be a very positive change," he said at a talk on Tuesday.

Another keenly watched figure in the work report is China's defence budget, which is expected to get a modest increase, a source with ties to the leadership told The Straits Times.

"Reviving the economy is the top priority now," the source said, requesting anonymity.

Last year, China increased its defence spending by 7.5 per cent to 1.19 trillion yuan (S$237.4 billion), a slightly slower increase compared to 8.1 per cent in 2018.

It is unclear if the annual full session of Parliament will have enough time to deliberate a proposal to elevate the political status of at least five Chinese cities from vice-ministerial to ministerial level.

The five - Shenzhen, known as China's Silicon Valley; Guangzhou, provincial capital of Guangdong; Qingdao in the coastal province of Shandong; Suzhou in the coastal province of Jiangsu; and Chengdu, provincial capital of Sichuan - boast GDP of over one trillion yuan each.

"Under the proposal, the cities will be under the direct jurisdiction of the State Council instead of their respective provincial governments," a source told The Straits Times, referring to the Cabinet.

"They are engines of economic growth," the source said, adding that they would receive preferential treatment from the central government, including tax breaks, incentives to attract investments and other policies.

Another proposal calls for Dongcheng and Xicheng districts of Beijing to be merged into a "central government district" that would no longer be under the jurisdiction of the Beijing city government.

"It will be like Washington DC," the source said, adding that three districts in neighbouring Hebei province will become part of Beijing.

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