Economic Themes from the National People’s Congress Illustrate CCP Concerns for Social Stability

PRC Premier Li Keqiang walks to the podium to deliver the government’s annual work report during the National People’s Congress in Beijing, March 5th, 2019. (Source: PRC State Council)

Introduction

This month, the National People’s Congress (Quanguo Renmin Daibiao Dahui, 全国人民代表大会), or NPC, and the Chinese People’s Political Consultative Conference (Zhongguo Renmin Zhengzhi Xieshang Huiyi, 中国人民政治协商会议) convened concurrently in Beijing. Collectively known as the “Two Sessions” (Lianghui, 两会), the annual meetings of these bodies—normally held for two weeks in the early spring—comprise two of the largest annual events on China’s official political calendar. The two bodies hold no real power—and function as, respectively, a rubber stamp legislature for Chinese Communist Party (CCP) policy decisions, and as a nominal advisory body intended to provide the state with a veneer of political pluralism. However, while the NPC and the CPPCC are both highly scripted, the “Two Sessions” often provide insights into the concerns and policy priorities of the CCP’s senior leadership.

During each year’s full session of the NPC, it has become standard practice for the People’s Republic of China (PRC) Premier—the official in charge of the PRC State Council, and the leading figure in managing national macroeconomic policy—to present a lengthy “government work report” (zhengfu gongzuo baogao, 政府工作报告). This annual report both extolls the state’s achievements over the course of the previous year, and lays out policy priorities for the year ahead. This year was no exception, and the opening of the NPC on March 5th was accompanied both by public release of the report, and a major speech by Premier Li Keqiang summarizing its contents. Li’s speech ranged across a broad range of policy matters, but economic policy was at its core. This year, Li’s comments were noteworthy for hinting at deep concerns regarding the country’s economic direction and the security of the regime.

Economic Highlights from the Government Work Report

The report and Li’s accompanying speech laid out a list of ambitious goals for 2019. These include an effort to boost the economy through reductions to value-added taxation: lowering the level for manufacturers from 16 to 13 percent, and the rate for transportation, construction, and other heavy industries from 10 to 9 percent. Goals were also announced to maintain consumer inflation at 3 percent; and to allow a rise in the state’s fiscal deficit to 2.8 percent of gross domestic product (GDP), up 0.2 percentage points as compared to 2018. The Premier’s report further called for reducing the ranks of the rural poor by ten million people, although the metrics for achieving this latter goal were left undefined  (PRC Government Work Report, March 5).

Two central points of the work report related to future projections for employment levels and GDP. The report called for creating 11 million new jobs in urban areas—the key regions for regime security—with a “surveyed” unemployment rate target set at 5.5. percent. In terms of GDP, the report claimed that, over the course of the past year, China’s economy had outperformed the official 2018 goal of 6.5 percent by expanding at a rate of 6.6 percent. For 2019, a new GDP growth goal was announced for a range between 6 and 6.5 percent (PRC Government Work Report, March 5), thereby continuing a recent trend in which annual projections for GDP growth have been gradually revised downward.

One glaring omission from the work report was any mention of “Made in China 2025” (Zhongguo Zhizao 2025, 中国制造2025), an ambitious state-driven program to advance China’s industries from lower-end to higher-end manufacturing in sectors such as pharmaceuticals, automobiles, and information technology. [1] The initiative was a centerpiece of Li Keqiang’s report presented in 2018, but it was not mentioned this year. The reasons for the omission are unknown, but may reflect at least some level of disenchantment with the program within CCP leadership circles. A glimpse into high-level opposition to “Made in China 2025” has been provided by former finance minister Lou Jiwei, who made statements this month that called the program a doomed effort on the part of the government to pick out future winning high-tech enterprises, and asserted that it represented a waste of taxpayers’ money (SCMP, March 7).

In laying out the state’s economic goals, Premier Li told the NPC that “Under the firm leadership of the Party Central Committee with Comrade Xi Jinping at its core… the year’s main targets for economic and social development were accomplished.” Li further asserted that the projected goals for 2019 were “ambitious but realistic — they represent our aim of promoting high-quality development, are in keeping with the current realities of China’s development, and are aligned with the goal of completing the building of a moderately prosperous society in all respects” (PRC Government Work Report, March 5).

Concerns for Domestic Security Impact the State’s Economic Projections

Although assessments regarding the state of China’s economy vary widely, most expert observers agree that the Chinese economy slowed over the past year in response to a range of factors—to include stock market devaluation, rising indebtedness, and disruptions to exports caused by the ongoing “trade war” with the United States (Carnegie Endowment, January 19; Bloomberg, February 6). Indeed, Premier Li himself admitted to challenges ahead for the Chinese economy, telling the NPC that in 2018, “China faced a complicated and challenging domestic and international environment of a kind rarely seen in many years, and [our] economy came under new downward pressure” (PRC Government Work Report, March 5).

The PRC’s official economic statistics have long been treated with skepticism by many economists, and this is particularly true in regards to the state’s published figures for GDP growth (Foreign Policy, March 2013). The CCP has long linked its legitimacy to rising prosperity, with steady and rapid GDP growth treated as a key benchmark of the state’s economic achievements. As such, the state’s figures are suspect: for example, Premier Li’s projection of an economic growth rate between 6 and 6.5 percent growth aligns closely with what internal CCP sources have identified as the minimal rate of economic growth required to avoid social unrest. Deng Yuwen, the former editor of the newspaper of the CCP Central Party School, wrote in January that “as far as the current national condition is concerned, future economic growth cannot go below 6 percent [or] otherwise there will be big problems… If economic growth were too low, the problems and contradictions obscured by the previous rate of high growth would stand out and intensify” (BBC Chinese Service, January 31; Chinascope, March 11).

Li Keqiang’s own comments accompanying the work report hinted at deep concerns for social order; and in striking contrast to the optimistic projections of past years, Li presented a picture of major challenges ahead for the Chinese economy. Li told the NPC that “Only alertness to danger will ensure safety” for the state in the times ahead, and that “a full analysis of developments in and outside China shows that in pursuing development this year, we will face a graver and more complicated environment as well as risks and challenges [that may be] greater in number and size… We must be fully prepared for a tough struggle” (PRC Government Work Report, March 5).

Conclusions

The true state of the Chinese economy is difficult to determine from official statements, and it may well be that the statistics and projections contained in documents such as the 2019 PRC Government Work Report conceal a macroeconomy that has slowed far more than the state would care to publicly admit. Furthermore, the unusually sober tone of Li Keqiang’s presentation at the NPC accords closely with dire warnings about the security of the regime made recently by other senior CCP officials (China Brief, February 20), as well as an ongoing and dramatic expansion of the government’s expenditures for its domestic security apparatus (China Brief, March 22). Despite all of the outward signs of China’s continuing economic successes, the leaders of the CCP evidently harbor deep anxieties about the future course of the country’s economic development, and of the “tough struggles” that the year ahead might hold in store.

John Dotson is the editor of China Brief. Contact him at: [email protected].

Notes

[1] For official statements on the “Made in China 2025” program, see: “State Council Opinions Regarding Strengthening the Implementation of Innovation Development Strategies, and Advancing and Deepening Development of Mass Pioneering Work and Mass Innovation” [国务院关于强化实施创新驱动发展战略进一步推进大众创业万众创新深入发展的意见], PRC State Council Document #37 (July 21, 2017), http://www.gov.cn/zhengce/content/2017-07/27/content_5213735.htm; and  “Li Keqiang: Strongly Pressing Ahead with ‘Double Innovation’ and ‘Made in China 2025’ and Using Innovation to Raise Economic Transformation to New Levels” [李克强:扎实推进”双创”和”中国制造2025″ 以创新驱动经济发展转型升级], Xinhua, Oct. 13, 2016, http://www.xinhuanet.com/politics/2016-10/13/c_1119713679.htm.