China’s “Two Sessions” meeting ended with focus on stabilizing growth and achieving technological self-reliance

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China has set this year’s economic growth target at 5%, the lowest growth rate in decades.

• China’s economic targets for 2023 indicate that China is likely to place emphasis on sustainable and stable economic growth, by focusing on domestic growth through increasing people’s income. This can be reflected through the target of creating 12 million new jobs (up from 11 million jobs in 2022).
• Other economic targets that remain unchanged, such as inflation (to be capped at 3.0%), reflect that the reopening of China will not lead to an acceleration in spending, that would push up inflation. However, the defense spending target is revised up by 7.2%, due to the unresolved conflict with the US and Taiwan.
• China still faces economic uncertainty in various aspects. Uncertainties surrounding the domestic situation include the real estate sector that has not yet shown signs of recovery and local government debt issues.

China prepares itself towards technological self-reliance and has signaled to accept foreign investment. This is seen as a reinforcement of the important goals announced at the Central Economic Work Conference (CEWC) in December 2022.

• Among other issues discussed, the topic of technological self-reliance was raised at the “Two Sessions”1 meeting. China will place more emphasis on investment in various research areas.
• At the meeting, the issue to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was discussed, which can be deemed as a signal of China’s readiness to accept foreign investment. Various investment facilitation conditions are expected to be adjusted such as rolling out equal treatment for foreign investors.

Xi Jinping was awarded unanimously a third term as China’s president

• At the meeting, Xi Jinping was officially awarded a third term as China’s president, making him the country’s longest-serving president, while Li Qiang, who is greatly trusted by Xi Jinping, was also appointed as China’s new prime minister. This reflects a greater centralization of absolute power and a more consistent issuance of various policies.  
• Other key economic positions, such as the Governor of the People’s Bank of China, the Minister of Finance and the Minister of Commerce, remain unchanged. This demonstrates the continuity of various policies that have been implemented.
• Li Shangfu was appointed as Minister of National Defense. He previously served as Director of the Equipment Development Department of the Central Military Commission. He is expected to help modernize China’s armed forces.

China’s economy in 2023 is expected to grow beyond KResearch’s previous projection. The Chinese economy is expected to grow by 5.2% in 2023 amid various risks that must be monitored.

• KResearch expects that China will be able to achieve its economic growth target of 5%, boosted by the country’s reopening and the government’s emphasis on its economy. China’s economy will grow by 5.2% in 2023, which is higher than the previous projection, as the impact of China’s reopening is likely to be less than expected, while economic activities will recover relatively quickly, as reflected in the expansion of PMI data in January-February.

1 The Two Sessions is the collective term for the plenary sessions of the National People’s Congress (NPC) and of the Chinese People’s Political Consultative Conference (CPPCC) convened annually by the Chinese government, usually in March of each year.

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