The National People’s Congress – the annual meeting of China’s parliamentary body – kicked off on Saturday March 5 at the Great Hall of the People in Tiananmen Square. Premier Li Keqiang presented the 2022 work report, which triggers fiscal spending and tax cuts to boost investment and consumption, aimed at mitigating an ongoing slowdown, boosting growth and projecting the trust.
All eyes are on the Communist Party’s two-decade reunion slated for this fall, in which President Xi Jinping will almost certainly get an unprecedented third term.
Above all, policymakers are looking to stabilize the economy, rather than make big revisions, to make sure nothing goes wrong before that key moment.
Xu Hongcai, deputy director of the Economic Policy Commission of the China Political Science Association, said, “Stability comes first ahead of the 20th Party Congress.
“We must create an environment for stable development.”
China’s economic recovery from the Covid crisis was initially strong, but analysts now agree that all signs point to a loss of momentum from the middle of 2021.
Debt problems in the housing market, strict zero Covid policy measures and shaky consumer confidence have all taken their toll on the world’s second-largest economy.
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He said: “I anticipate that delegates will be very careful this year and avoid airing alternative viewpoints on hot topics such as the zero-Covid policy, shared prosperity or China’s stance on Ukraine. “
Opening the budget on Saturday, Premier Li announced a target to expand the country’s economy “by around 5.5%” this year, signaling the government’s focus on stabilizing growth.
He said: “In our work this year, we must make economic stability our top priority and pursue progress while ensuring stability.”
Li acknowledged that China’s economy will face challenges this year, pointing to the slow recovery in consumption and investment, weak export growth and a shortage of resources and raw materials.
Mr Li released a government budget for this year that called for additional spending, as well as the issuance of more bonds to pay for it, as analysts said the economy could only grow by further increasing borrowing and expenses.
The central government, which has relatively little debt, will increase by 18% this year – in contrast, last year’s increase was only 7.8%.
The budget also includes heavy spending to help rural families and build more rental housing, as well as further strong growth in military spending.
Meanwhile, the central bank began cutting interest rates and injecting more liquidity into the economy, while local governments accelerated infrastructure spending in a bid to counter the slowdown.
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However, analysts say any further property tax lawsuits should wait until the second half of 2022, when the housing market is expected to stabilize.
In the meantime, regulators have eased curbs on housing finance slightly to avoid defaults.
But with the decision on President Xi’s third term looming, analysts don’t expect much to make headlines at the next meeting.
Wang Jun, chief economist at Zhongyuan Bank, said: “When the economy is facing relatively large pressures, it is not the right time to push forward drastic reform measures.”