China’s annual National People’s Congress (NPC) meeting concluded on Monday with a speech by president Xi Jinping and a press conference held by new premier Li Qiang. Neither event was view-changing, and from a macro standpoint they both reinforced a theme at this NPC of broad stability over short-term growth. If your attention is fixed on tumult in the US banking system, feel free to skip this note and wait for our NPC wrap up report coming later this week.
Xi Jinping speech treads familiar ground
Xi gave a short speech to formally kick off his third term as president, having been ‘re-elected’ by NPC members on Friday with a vote of 2952 to…(checks notes)…0. (Sensitive to domestic discussion of this result, Beijing’s cyber authorities appear to have temporarily blocked references to “2952” in domestic social media).
As at the 2018 NPC, when Xi started his second term, this speech laid out his main objectives for the next five years and was light on policy details, particularly for the economy.
The main themes were familiar. The key phrase was “building a strong country and rejuvenating the nation,” which Xi mentioned seven times. (He referenced “strong country” twelve times, compared to only twice in 2018.) To achieve this, China must:
- Focus on high quality development, led by innovation, technological self-reliance, industrial upgrading, and green growth. China must raise the quality of the economy while growing at a “reasonable pace.”
- Put the people first, including by strengthening the social safety net and more equitable development. This is an area that typically gets more lip service than action, but it is worth watching given Beijing’s intensifying focus on boosting consumption.
- Balance development with security, a broad concept that includes economic security (such as good and energy security), domestic political stability and guarding against external treats though military modernization.
- Unite under the rule of the Party
In discussing China’s relationship with the rest of the world, Xi reaffirmed pledges to continue to open up while also stressing China’s increasingly ambitious efforts to shape global issues; Beijing’s ability to secure a diplomatic deal between Iran and Saudi Arabia last week was well timed to highlight Xi’s “global security initiative” and emerging role as a power broker. Xi’s language on Taiwan was strong but not new, and continued to reference promoting “peaceful development” of cross-Strait ties.
In short, Xi remains intensely focused on his national project of ensuring China’s rise as a great power and boosting quality of life. This is an agenda in which growth is a means and not the end. It helps set the context for the NPC’s announcement of relatively conservative growth targets and disciplined stimulus (see our discussion of the NPC’s macro policy announcements HERE).
Premier Li Qiang stresses implementation, not new policies
There was significant anticipation for the first press conference by Li Qiang in his role as premier. Li, a close Xi acolyte, was tapped as premier at the 20th Party Congress in October but only formally appointed at the NPC. A career local official, there remain many questions about how Li will operate in a new role running the day-to-day functions of the government and implementing economic policy. His remarks provided some clues.
Li made it clear early in the press conference that Beijing is much more focused on returning to economic normalcy this year – particularly when it comes to the labor market – than pursuing a high growth rate for its own sake:
Objectively speaking, the vast majority of ordinary people do not focus on how much GDP is increasing. They care more about housing, employment, income, education, healthcare, the environment and other specific things they experience.
Li projected confidence in the economic rebound underway but also noted that hitting the 5% target will take “redoubled efforts.” He had little to say about stimulus other the relatively restrained measures announced earlier at the NPC. Instead, he emphasized priorities for implementation: boosting employment, improving the environment for the private sector, and promoting trade and foreign investment. This policy orientation reaffirms our outlook for China’s economy in 2023, with reopening rather than stimulus doing most of the work in facilitating the economic rebound. Services will be the main growth driver, with relatively fewer positive spillovers to global growth than in a cycle driven by accelerating investment.
Li’s overall tone was low-key. He projected the sense of an official focused on implementing policy rather than guiding it. While Xi trusts Li much more than he did outgoing premier Li Keqiang, the new premier’s authority will likely have significant limits. He is unlikely to push back on Xi when security and geopolitical issues conflict with economic priorities. Nor is he likely to be as influential in charting economic policy as retiring vice premier Liu He, who may leave a big hole to fill as I wrote yesterday (link HERE).
