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China’s ‘Two Sessions’ set to get under way amid slowing economy and trade tensions with US and EU

Manufacturing continues to stall along with property, debt and foreign investment woes as world of commerce looks to Beijing for swing away from domestic security concerns

China's annual legislative meetings, the 'Two Sessions', start on Monday: Much of the talk is likely to focus on 'new productive forces', the latest piece of jargon from the Communist Party. Photograph:Pedro Pardo/AFP

Denis Staunton's face
Denis Staunton in Beijing
Sun Mar 3 2024 - 16:00

China’s biggest annual political event begins in Beijing on Monday amid trade tensions with the United States and the European Union and a sluggish domestic economy. Over the course of about a week, the government will set key economic targets, make high-level appointments and outline the policy direction for the coming year.

Known as the Two Sessions, it takes the form of parallel sittings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC). With about 3,000 members, the NPC is China’s legislature while the 2,000-plus member CPPCC is an advisory body that develops policy proposals.

The Communist Party approves all legislative decisions and appointments in advance and the legislature automatically endorses them. But the plenary meetings in Beijing’s Great Hall of the People will be closely observed by foreign governments and financial markets for signs of a change of direction in Xi Jinping’s policies.

Official data last week reported the fifth consecutive monthly contraction in manufacturing activity amid a deep and enduring crisis in the property sector. Local governments are struggling with huge debts and consumers, fearful about their own economic prospects, have been saving rather than spending.

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Foreign direct investment has slumped and foreign companies complain that Beijing’s focus on national security has left them uncertain about how to conduct business in China. A number of foreign firms have been raided in recent months over alleged breaches of national security laws which businesses claim are too vaguely drafted.

The business world will be watching Xi’s statements and next week’s closing press conference by premier Li Qiang for signs of a shift in emphasis away from national security. And markets are expecting some economic stimulus to be announced, although few are predicting government intervention on the scale seen during economic crises in 2008 and 2015.

Much of the talk at the meetings is likely to focus on “new productive forces”, the latest piece of jargon to emerge from the Communist Party.

“The concept refers to a new form of productive forces derived from continuous sci-tech breakthroughs and innovation that drive strategic emerging industries and future industries in a more intelligent information era,” the official Xinhua news agency said last week.

This could see China doubling down on its strategy of investing in the technologies of the future, which has allowed the country to lead the world in the production of solar panels and electric vehicles. The European Commission has already announced an investigation into Chinese support for its electrical vehicle industry and Joe Biden said last week raised the prospect of an import ban.

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“China is determined to dominate the future of the auto market, including by using unfair practices,” he said.

“China’s policies could flood our market with its vehicles, posing risks to our national security. I’m not going to let that happen on my watch.”

Biden invoked national security concerns in support of action against Chinese electric vehicles, suggesting that Beijing could use them to spy on Americans.

“Most cars these days are ‘connected’ – they are like smartphones on wheels. These cars are connected to our phones, to navigation systems, to critical infrastructure and to the companies that made them. Connected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China. These vehicles could be remotely accessed or disabled,” he said.

At last year’s Two Sessions, Xi accused the US of leading a campaign of “encirclement and suppression” against China. Despite the tensions over trade, bilateral relations have improved since then and the Chinese leader is unlikely to repeat the attack this year.

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