China's annual plenary sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), commonly referred to as the "Two Sessions", kicked off in Beijing on March 4th.

However, before Premier Li Qiang had even presented his initial work before the congress, the NPC announced on the first day that it was scrapping a tradition of thirty years: The premier's press conference, which usually takes place after the two sessions, will not be held for the foreseeable future.

For observers who were looking forward to getting a glimpse of the inner workings of the often opaque Chinese economy, this setback leaves them with no numbers to analyze except for those on the official reports.

The sessions are dull and scripted affairs. But in the past, the premier could be expected to go off script under the barrage of questions and reveal some nugget of nuance. 

Whether it's ex-Premier Li Keqiang's telling "there are 600 million people who barely make 1,000 (RMB) a month" or Wen Jiabao's off-the-cuff "reforms to the economic institution cannot be carried to completion unless reforms are made to the political institution," these press conferences were always a gold mine of quotes for the outside world to dissect. 

"The power of the Chinese State Council has been steadily undermined by the Communist Party. They are sending a loud and clear signal by abolishing the press conference," opines Wang Hsin-hsien (王信賢), director at National Chengchi University's Graduate Institute of East Asian Studies.

The removal of the press conference leaves the work report as the only official document disclosing the Chinese government's internal deliberations, by which the outside world might augur the vital signs of the superpower's slowing economy.

According to statements made by Premier Li Qiang on March 5th, China's forecasted GDP growth in 2024 will hold steady at 5%, which is higher than the IMF's prediction of 4.6%.

But 2023 offered a little leeway due to the post-pandemic recovery. This year, China is facing an unsolved housing bubble and tanking consumer confidence. Just how does the central government intend to stand fast at 5%?

Based on what Beijing has decided to reveal, the road to reaching its target will be arduous indeed.

Government bonds won't be enough to shore up growth

The first figure that must be considered is China's deficit ratio. Like projected GDP growth, it's another blast from the past: At 3 %, it's exactly what it was in 2023.

The deficit is noteworthy because it tells us how much the government is willing to spend to stimulate the economy.

The new wrinkle is that Li has indicated the government's intent to issue ultra-long special government bonds for several consecutive years. The first wave in 2024 will amount to a trillion yuan in bonds.

And that is just a taste of things to come.

Is this a sign that China is returning to its old ways of using debt to prod along its economy? "This time it won't be enough," predicts Guo-chen Wang (王國臣), a researcher at Academia Sinica. 

His analysis shows that China's current property debt, coupled with the debt run up by local government financing vehicles (LGFVs), amounts to 20 trillion RMB. What the government is offering as a counterweight isn't enough. "One trillion yuan a year in bonds is far too little to save the economy."

What's the point of running up government debt if it's not enough to get the job done? The answer may lie in the CCP's other plan of attack: the development of a brand-new economy. 

Will new productive forces be enough to turn the tide?

The phrase "new productive forces" was first coined by President Xi Jinping during an inspection of Heilongjiang last September. This year, the phrase found its way onto the top of a list of essential tasks in the government's work report.

But what does it mean? Huang Qifan (黃奇帆), former Vice-Chair of the NPC's Financial and Economic Affairs Committee, wrote an opinion piece earlier this year postulating that the term stood for "new production, new services, and new business models".

In other words, it's a rebranding of the of "high-quality production" principle that Beijing has been trying to achieve through upgrading the country's supply chains and improving production efficiency for the past few years.

The main difference lies in the new industries that were highlighted. 

Topics discussed during the Two Sessions didn't spring out of a vacuum. As far as three months back, hints of the major economic decisions were already discernible. 

Last December, China's Central Economic Work Conference announced that not only was China developing its digital economy, artificial intelligence, bio-manufacturing, quantum computing, and green economy; but compared to the previous conference, it has also added "commercial aviation" and drone-centric "low-altitude aviation". In other words, the importance of the aviation and military industries has been upgraded. 

The central government has drawn up a framework for the new direction. However, experts familiar with the ins and outs of the Chinese economy see warning signs.

Services and 'New Three' were not mentioned 

"These new policies won't provide enough job opportunities," says Bert Hofman, Chief Economist for the East Asia and Pacific Region at the World Bank. "Many of the new industries are highly automated."

China's employment target is higher than last year: "over 12 million new jobs".

Hofman points out that the service industry was China's primary job creator prior to the pandemic. But currently, there are no major policies designed for this sector. 

Some Chinese economists also stress that "exports" will be key to maintaining steady growth.

That's why at the Central Economic Work Conference last December, the government proposed propping up the global competitiveness of the "New Three" industries: electric vehicles, lithium-ion batteries, and solar cells.

As recently as a week before the Two Sessions, Shenzhen rolled out new plans to boost auto exports, going so far as to encourage car companies to "build their own fleets of cargo ships".

Shenzhen is not only China's hub of foreign trade; it's also home to Chinese electric vehicle giant BYD and the foundation of all Chinese electric vehicle exports.

Unfortunately, this local policy, which was designed to piggyback off of the central government's mandate, will likely experience bumpy roads. Beginning this year, Europe and the U.S. initiated anti-subsidy investigations into the flood of Chinese electric cars.

"China is running out of tricks to pull out of its sleeve," says Alfred M. Wu (吳木鑾), a former Chinese journalist who’s currently an Associate Professor in the Lee Kuan Yew School of Public Policy at the National University of Singapore. "As it stands right now, some of these economic targets are little more than a way to boost morale.”

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Have you read?

• Following Kinmen patrol fatalities, will China keep challenging the Taiwan Strait median line?
• China's annual Two Sessions: How will they impact Taiwan?
• Can economic sanctions deter China's military actions against Taiwan?

Translated by Jack Chou
Edited by TC Lin
Uploaded by Ian Huang