China's Premier Li Keqiang (center on screen) addresses counterparts during the ASEAN-China summit of the Association of Southeast Asian Nations, held online on Nov. 12, 2020.
Nhac Nguyen/AFP via Getty ImagesChina this week announced March 5 as the start date for its annual high-level legislative meetings, after last year’s summit was upended by the coronavirus.
The pre-eminent weeklong gatherings are attended by hundreds of national legislators who review and approve economic and other policy objectives.
Last year’s “Two Sessions” were disrupted in several ways by the chaos of the pandemic. At the time, little information was given on when, or if, they would take place, and finally they were held two months later than usual, in May. They were also shortened, and information from the meetings themselves was even tighter than usual.
More notably, it was the first year in decades that they concluded without setting a GDP target. It is unknown if a target will be set this time around, for 2021, with analysts telling Barron’s that it is anyone’s guess. But China is poised to be the only major economy to grow this year, and experts predict the country will see a global growth-driving 8% or more GDP increase for 2021.
UBS’s chief Asia economist, Wang Tao, wrote that she expects China’s economy to grow 8.2% next year, the most in 10 years, which would account for much of what the investment bank predicts will be 6% global GDP growth. The world economy shrank 4% this year.
China is entering the new year in economic conditions envious to the rest of the world. Export growth is surging. Factory activity continued solid expansion in December, a Reuters poll showed on Tuesday. Even retail sales last month were up nearly 6% year-over-year, official data showed.
That being said, “unsurprisingly, healing is uneven,” wrote authors at S&P Global. “Large firms are finding their feet faster than small firms and industry is recovering faster than the service sector.”
Much of the March meetings will go toward reviewing China’s latest Five-Year Plan, which was published in draft form last month. Its direction in large part continues China’s pre-pandemic economic path, with minor policy departures.
“Initial details suggest that Chinese leaders plan to expand the state’s role in the economy and advance national economic security interests; use market restrictions and its One Belt, One Road global networks to foster Chinese-controlled supply chains; and sharpen the use of antitrust, intellectual property (IP), and standards tools to advance industrial policies,” wrote the U.S. Congressional Research Service (CRS).
A significant portion of the plan emphasizes foreign collaboration in innovation-ripe areas including basic research and technology, with notable mention of opening overseas research centers. China this week expanded by 10% the list of industries in which it will invite foreign investment, mostly in advanced manufacturing, including artificial intelligence and 5G technology, according to an announcement by the National Development and Reform Commission.
“China’s new semiconductor policies encourage foreign academic and industry collaboration and Chinese corporate R&D centers overseas,” added the CRS.
Other sectors ripe for midterm investment include electric vehicle-focused auto makers, larger internet players, and leading consumer brands set to benefit from China’s consumption upgrading, investment firm Pimco wrote in a note. Financial firms underwriting growth in these industries will “increase exposure to privately-owned enterprises in these sectors,” the company said.
Tanner Brown covers China for Barron’s and MarketWatch.
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