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The National People’s Congress of China, the annual session of the country’s parliament, will convene on Friday for a meeting that will focus on a problem many other countries wish they had: how to control an economy that has recovered from the coronavirus pandemic.
“There have been intense discussions on monetary and fiscal policy,” Wang Jun told the China International Economic Exchange Center, a government think tank in Beijing. “The main objective is to stabilize the leverage, but if the policy [tightening] it goes too far, too fast, it can have a negative impact on financial markets as well as the real economy. “
The NPC will last for approximately one week and is usually a forum where previously agreed policy goals and measures are formally approved. However, last year’s session was dominated by Chinese President Xi Jinping’s surprise announcement of a strict national security law for Hong Kong after the city was rocked by anti-government protests in 2019.
The meeting also provides the biggest stage of the year for Xi to project his undisputed control over both the government and the Chinese Communist Party as he prepares for an unprecedented third term in power in late 2022.
China’s post-Covid recovery is in stark contrast to the situation in the United States, where the pandemic has claimed the lives of more than 500,000 Americans and President Joe Biden is pushing Congress to pass a 1.9 economic stimulus package. billions of dollars.
Guo Shuqing, one of China’s most powerful financial regulators, warned this week of the dangers of “extremely loose monetary policies” in the United States and other pandemic-ravaged economies, saying the measures could cause “too much fluctuation” in markets. Chinese financiers.
He added that China’s housing market is still affected by “relatively large bubbles” and suggested that interest rates on loans “will rebound” this year. Guo, who heads the banking regulator and is also the highest-level party official in China’s central bank, declared late last year that the real estate sector was the “largest gray rhino in the country in terms of financial risk.” .
Guo’s comments sparked a sell-off in regional markets, illustrating the difficult balance he and other financial officials must try to strike. Stimulus measures implemented by Chinese President Xi Jinping’s administration early last year helped spur investment, but also pushed debt levels in the world’s second-largest economy to around 270 percent of GDP.
“While the leadership is confident about the trajectory of the economy, there is still a lot of uncertainty,” said Andrew Polk of Trivium, a Beijing-based consultancy. “The authorities must find a way to unleash consumption and offset industrial production and real estate investment.”
The NPC was dominated last year by Xi Jinping’s introduction of a national security law to attack pro-democracy protests in Hong Kong, where lawmakers and opposition activists are on trial for allegedly violating the rules © Reuters
Shuang Ding, chief China economist at Standard Chartered in Hong Kong, said Beijing is likely to cut its budget deficit to 3 percent of GDP, up from 3.6 percent last year. But he also forecast that the Chinese economy would grow at least 6 percent year-on-year, with “substantial scope for outperformance,” and create 11 million jobs.
“The most pressing economic problems are how to withdraw from last year’s expansionary fiscal policy and how to increase consumption,” said Jia Jinjing, an economics professor at Renmin University in Beijing. “The central deficit budget will be lower than last year but still above 3 percent. We cannot rely too much on rising debt to stimulate consumption. “
NPC delegates will also formally approve the party’s fourteenth five-year economic plan, which focuses on achieving “self-sufficiency” in a number of critical technology sectors, as well as ambitious environmental goals, including reaching maximum carbon dioxide emissions for 2030 and zero emissions by 2060.
The 2020 NPC session was delayed for nearly three months by the pandemic and focused on the enforcement of national security law in Hong Kong.
This year, he is likely to pass measures that will further reduce the representation of the pro-democracy camp in the city legislature. He is also expected to unveil rules that consolidate control of Beijing into an “electoral committee” that is already in favor of the system that elects Hong Kong’s chief executive.
Dozens of Hong Kong democracy activists, including editor Jimmy Lai and jailed student leader Joshua Wong, have been charged with alleged crimes against the security law. In a speech last month, Xia Baolong, the head of the Chinese government office responsible for Hong Kong, singled out Lai and Wong as “extremely vile anti-China elements.”
“There seems to be no end to the crackdown,” said Willy Lam, an expert on Chinese politics at the Chinese University of Hong Kong. “Xi has decided to end Hong Kong’s opposition movement completely. For ordinary people, Beijing will insist on ‘patriotic education’ in schools and media. “
A Chinese academic advising Beijing on Hong Kong affairs said the territory had been “too rampant” before the passage of the national security law last year. “The central government had no other option,” said the academic, who asked not to be identified. “Hong Kong’s opposition overestimated its power.”
Additional information from Xinning Liu in Beijing
