"2024 Two Sessions: Key Takeaways and Key Takeaways and Implications for MNCs," AmCham China Quarterly, Apr. 10, 2024, pp.32-34.

Foreword from James McGregor
This year’s Two Sessions unveiled no significant reform-oriented business policies as the Chinese leadership emphasized balancing economic development with security. Economic policy details were impacted throughout the meetings by the country’s focus on “intense competition”
in technology and geopolitical influence with the United States and its allies.

The NPC annual meeting did offer rhetorical assurances of providing equal
treatment and market access for foreign and private Chinese businesses with
state-owned enterprises. Some analysts anticipate that positive business policies could come forth when the Communist Party holds its policy-making 3rd Plenum, which has been delayed by several months so far.

Business groups expressed impatience. “Announcements don’t move markets and promises don’t drive investments,” said Sean Stein, Chairman of the American Chamber of Commerce in China.

The NPC’s standing committee said their priority is to enact new laws to
“modernize China’s system and capacity for national security,” as President Xi
Jinping told officials in charge of science and technology to “fight the battle well for key technologies.” Foreign Minister Wang Yi at his press conference complained that sanctions and technology restrictions imposed by the US are “reaching bewildering levels of unfathomable absurdity,” and that these actions “will eventually harm yourself.” He also described China’s relations with Russia as “a new paradigm of major power relations.”

The meetings furthered Xi Jinping’s agenda of absolute Party control and unquestioned personal power through a legal revision that further relegates the State Council to an implementing body that faithfully carries out Party decisions. The premier’s press conference, the signature closing event of the NPC for decades, was cancelled for this year and future years.

This event had served as a unique show-case for premiers to take center stage and demonstrate their thinking and personality in front of a national TV audience and hundreds of reporters.

As the meetings were taking place in Beijing, the US and the EU were also
focused on China and security. The US pressured the Netherlands, Germany,
South Korea, and Japan to further restrict China’s access to semiconductor technology. The US House expedited movement of a bill to force ByteDance to sell TikTok or be banned in the United States. China-focused legislation to restrict collaboration between US companies and "biotechnology companies of concern" was sent to the Senate floor. The EU began registering all imported Chinese electric vehicles in preparation for collecting retroactive
duties should its ongoing Chinese EV investigation determine they are government subsidized.

If one steps back and takes a global view, China, the United States, the EU and
other major economic and trading powers are grappling with essentially

China’s annual lianghui, or “Two Sessions,” are the gatherings of the Chinese People’s Political Consultative Conference (CPPCC), a political advisory body, and the National People’s Congress (NPC), China’s top legislature. This year’s Two Sessions took place in Beijing from March 4 to March 11. Premier
Li Qiang delivered the annual Government Work Report, outlining achievements and priorities for the upcoming year. Ministerial press conferences addressed key topics such as the economy, foreign
relations, and societal welfare. Global advisory and advocacy firm APCO shares key takeaways and provides insight into this year’s proceedings.

the same challenge and dilemma. In an atmosphere of unstable geopolitics and deep distrust between the superpowers how can each country and its companies handle the poisonous politics and intense competition
while maintaining significant commercial connections with each other that are in their own economic self-interest and good for peace and stability?

Key Takeaways

The government signals confidence in China’s economy by setting an ambitious GDP target

The Government Work Report (GWR) has set a GDP growth target of "around 5%" for 2024, consistent with last year's goal. However, meeting this target may pose increased difficulty due to the higher economic base in 2023
compared to 2022. The economy will need to expand by at least RMB 6.3
trillion (USD 888 billion), surpassing last year's growth of RMB 5.5 trillion (USD
787 billion). The International Monetary Fund and World Bank forecast growth
rates of 4.6% and 4.5%, respectively, citing ongoing weaknesses in the real estate sector and subdued global demand for Chinese exports as major challenges. Despite this, government officials, including National Development and Reform Commission Chairman Zheng Shanjie, have described the target as "reasonable" and "attainable," indicating confidence in
the economy and a commitment to pro-growth policies. To support growth, the government plans to issue RMB 1 trillion (USD 139 billion) in ultra-long special central government bonds in 2024.

Achieving this year's target is crucial for China's long-term goal of doubling
its GDP by 2035 relative to 2020 levels, requiring an average annual growth rate of 5.08% between 2020 and 2035.

China will strive to better balance security and economic development

Safeguarding security has become the paramount objective driving a wide array of policies in recent years, a sentiment echoed unequivocally by President Xi Jinping. At the 20th National Congress of the Communist Party of China in 2022, he emphasized, "National security is the bedrock of national rejuvenation, and social stability is a prerequisite for building a strong and prosperous China." This year's Two Sessions underscores the pursuit of closer coordination between economic and security policies, striving for a balance that can sustain robust growth momentum while ensuring security across various domains. The report emphasizes the symbiotic relationship between security and development, aiming for their harmonious coexistence rather than conflict. It calls for greater consistency in macro policies, indicating
a need for coordinated development and implementation across different policy areas, including security. Despite this emphasis on coordination, the Government Work Report (GWR) outlines measures to bolster China's security capacity in various sectors such as internet and data security, supply chains, energy, resources, and food. Additionally, the report pledges to mitigate risks in real estate and local government debt, underscoring the broad scope of security concerns, which encompass aspects of social stability.

A new term - “new productive forces” - underlines China’s ever-growing ambitions for technological innovation

The GWR highlights the acceleration of "new productive forces" (NPFs) as its
primary focus for 2024, a term introduced by President Xi Jinping in September 2023 and subsequently echoed in various official channels. NPFs encompass strategic emerging and futuristic technologies aimed at driving economic growth, mirroring China's aim for sustained rapid economic expansion amidst geopolitical challenges. Leveraging successful export models like solar cells, lithium-ion batteries, and electric vehicles (EVs),
China seeks to dominate future technology markets through domestic R&D. This strategy, outlined in the GWR, involves establishing demonstration zones, bolstering supply chains, fostering venture capital, protecting intellectual property rights (IPR), and promoting digitalization. While success across all sectors isn't guaranteed, these initiatives signal a significant
response to macroeconomic and geopolitical pressures, potentially establishing new growth channels.

China doubles down on nurturing domestic talent to support its development priorities

The 2024 GWR prioritizes "invigorating China through science and education"
as the second-highest goal in 2024, a concept championed by Deng Xiaoping,
Jiang Zemin, and consistently promoted by Xi Jinping. This year's emphasis lies in strengthening China's education system to cultivate domestic talent and boost innovation capacity, contrasting with previous reports where education was primarily addressed in the context of social development. The GWR positions education as pivotal for achieving technological self-reliance and unleashing new productive forces (NPFs). The decision aligns with urgent
talent shortages in strategic industries like the chip and AI sectors, with an estimated gap of 200,000 workers in the chip industry and potentially millions in AI. Minister of Education Huai Jinpeng highlighted the need for colleges and universities to focus on talent cultivation, especially in basic research and engineering, proposing increased support for young scientists,
promotion of regional innovation centers, and fostering closer collaboration between academia, industry, and end-users, as discussed at the Two Sessions.

“It is essential to deepen reforms in the scientific and technological system and the education and talent systems and remove obstacles to the development of new quality productive forces.”
– Chinese President Xi Jinping

Boosting consumption remains a top priority, but the policy toolkit stays largely unchanged

The shift of domestic consumption into a primary economic growth driver remains central to China's long-term strategy, echoing priorities from 2023
into 2024. Minister of Commerce Wang Wentao emphasized incentivizing the
replacement of used goods and boosting services consumption in entertainment, tourism, and sports. While initiatives like the "trade-in" program show short-term promise, doubts linger about their lasting impact. A notable addition is the pledge to implement paid leave to stimulate consumption, though details are scarce, and concerns persist about employer
adoption. The report also vows to promote digital, environmentally friendly,
and health-related consumption, but consumer confidence hinges on external
factors, notably the state of China's real estate market, a key reservoir of household wealth.

Energy security concerns weigh on near-term environmental goals, but green industry push continues

The GWR outlines limited quantitative environmental goals for 2024, with
China aiming to reduce energy intensity by 2.5%. Last year's shortfall in energy intensity reduction is acknowledged, attributed partly to sustained demand for coal power, deemed crucial for ensuring energy stability. Despite this, the GWR suggests that China's renewable energy targets are within reach, notably its pledge to increase solar and wind power capacity to 1,200 GW by 2030. Progress in solar capacity installation has been rapid, with plans to further expand wind and photovoltaic power bases. China is poised to exceed its renewable energy goals ahead of schedule, aligning with its commitment to peak CO2 emissions this decade. Beyond the power sector, the GWR emphasizes green transformation in industry, including the development of green supply chains, strengthened waste and plastic pollution controls, and expansion of the national emissions trading scheme. Furthermore, the report underscores investment in new green technologies, particularly new-energy vehicles, energy storage, and hydrogen power, recognizing their significance not only for economic growth but also for climate mitigation efforts, echoing recent statements emphasizing "Green
development" as fundamental to China's high-quality development.

What does this mean for MNCs?

The implications for multinational corporations (MNCs) following the Two
Sessions largely echo previous economic conferences and announcements, suggesting minimal change to their outlook on forthcoming challenges and
opportunities. The heightened focus on "new productive forces" indicates an
accelerated drive towards technological self-sufficiency in China, likely intensifying competition in key tech markets. Decarbonization efforts are expected to gain momentum, potentially leading to stricter environmental regulations. Nevertheless, opportunities may persist for foreign businesses aligning with China's objectives. Additionally, commitments to address MNC concerns, such as improving macro policy consistency and ensuring development alongside security, offer positive signals. Pledges to stimulate
consumption and achieve ambitious GDP growth targets further indicate potential benefits for foreign enterprises. However, the actual impact on MNCs hinges on the translation of these commitments into concrete policy actions.

About APCO
APCO is a global advisory and advocacy firm helping leading corporations,
foundations and governments navigate a complex world. An independent and
majority women-owned company, APCO brings diverse people and ideas together and works beyond traditional boundaries, building un/common ground.SM upon which progress is made.

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