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    Two Sessions 2024: Xi charts course towards building a high-tech economy

    Published On: 12 March 2024

    In a new research briefing, Junni Park, China Advisor, provides an assessment of this year’s ‘Two Sessions’ [1] – China’s most important annual political meetings that set the government policy agenda for the year ahead. With contributions from Charlie Humphreys, Director of Corporate Affairs.

    Key takeaways

    • Amid rising external risks, Beijing maintains its commitment to steering China toward a more resilient growth trajectory through innovation and green technology. Despite current economic challenges, there is no indication that the government will resort to major stimulus or reinflate the property sector to bolster short-term growth.
    • The growth target for 2024 was set at “around 5%.” This was in line with expectations and mirrors last year’s goal, though it is higher than many forecasts for China’s growth this year.
    • The government will continue efforts to promote foreign investment with further market opening and steps to improve the business environment. However, geopolitics and the ruling Communist Party’s emphasis on national security are making life more complicated for MNCs in China.
    • This year’s Two Sessions highlight the increasing dominance of President Xi Jinping and the Party, reducing the State Council to a mere policy implementer.


    This year’s Two Sessions were keenly watched for indications of the government’s plans to revitalise the economy, which has recovered slowly and unevenly from the pandemic.

    Domestically, challenges include weak business and consumer confidence, local government debt, and ongoing difficulties in the sluggish property sector. Externally, China faces rising tension and conflict over technology with the West, along with uncertainties stemming from two ongoing wars and upcoming elections, most importantly in the United States.

    Given China’s economic challenges, some observers hoped that Beijing might make a course correction, such as introducing a major stimulus package to boost growth or taking forceful moves to revive the property sector. Neither was forthcoming.

    Instead, the Two Sessions confirmed Beijing’s commitment to reshape and de-risk the Chinese economy by fostering home-grown technology and innovation and reducing reliance on foreign technology and unsustainable growth drivers like property and debt-driven infrastructure investment. The outcomes of the meetings reinforce the view that Xi is willing to accept slower growth to achieve these goals, which he sees as crucial to strengthening the Party’s position and claiming China’s rightful place in the world [2].

    Economic targets held steady for 2024

    Economic goals laid out in Premier Li Qiang’s government work report for 2024 are virtually identical to those for 2023, including the growth target of “around 5%.” This is a more ambitious goal than last year when growth was measured against the low base of 2022, when tight pandemic controls were inhibiting activity, and higher than many forecasts like the IMF’s 4.6% and the World Bank’s 4.5%. The target reflects the leadership’s desire to project confidence in its ability to keep up the pace of expansion.

    With monetary policy limited by low loan demand and a weak yuan, the main support for the economy will come from moderate fiscal expansion. The government retains a 3% budget deficit target and increases the local government special purpose bond quota by RMB 100 billion to RMB 3.9 trillion (USD 543 billion)[3]. Moreover, the central government plans to issue ultralong special treasury bonds, starting with USD 139 billion this year, signalling a shift to more centralised fiscal management after local governments took on too much debt.

    It remains unclear whether this moderate fiscal expansion will suffice to meet the growth target. Additional stimulus may be considered later in the year, pending a clearer economic outlook and interest rate adjustments by the US Fed.

    Technological progress is the top priority

    With China facing narrowing access to Western hardware, the top two goals in the work report concern technological advancement, a shift from last year when expanding domestic demand was the first priority. This laser-focus on innovation is captured by the hot phrase of this year’s Two Sessions, “New Productive Forces,” which is Xi’s slogan for growth driven by tech and productivity.

    Officials announced a raft of measures to support industrial modernisation. The central government budget for science and technology was up by 10%, a notable rise on last year’s 2% increment. The central bank will create two more relending tools to support tech innovation and transformation and there also will be further tax cuts for innovation and manufacturing this year.

    Priority sectors identified in the work report include connected electric vehicles (EVs), new materials, hydrogen energy, innovative pharmaceuticals, bio-manufacturing, and commercial aerospace. China also aims to boost exports of the “new three” (EVs, lithium-ion batteries, and solar panels), now a RMB 1 trillion market which grew 30% in 2023.

    Net-zero agenda regains momentum

    Alongside technological innovation, the green economy is the other long-term strategic theme. Efforts to decarbonise the Chinese economy, which slowed during the pandemic, are now accelerating.

    The government aims to achieve a 2.5% reduction in energy intensity this year, surpassing last year’s 2.0% target. Amid the disruptions of the past three years, China has fallen behind on some of the climate goals in its 14th Five-Year Plan (2021-2025). Officials are now under pressure to achieve sharp reductions in energy and emissions intensity to catch up and meet these binding targets by the end of 2025, which will likely mean demands on industry to accelerate decarbonization.

    The long-term outlook for China to decarbonise its economy remains positive based on the country’s significant capabilities in the production of essential equipment for renewable energy production. China retains the highest level of solar panel manufacturing capacity among all countries [4] as well as the largest net onshore wind electricity capacity additions by country [5].

    Last year, a surge of investment in solar and wind saw China reach a milestone in its energy transition as renewable capacity surpassed thermal power capacity for the first time. This year will see more of the same, with a focus on large-scale renewables projects in remote regions, distributed wind and solar capacity, and long-distance transmission lines and energy storage to integrate these intermittent sources into the national grid.

    Premier Li’s work report also included an entire section on promoting the “green and low-carbon economy,” pointing to the business opportunities linked to China’s drive to net-zero. There will be various supportive measures to accelerate the green transition, including improved fiscal, tax, and pricing policies, as well as the development of market-based mechanisms, such as expanding the national emissions trading system (ETS) to cover more sectors.

    A more assertive stance on global affairs

    As China seeks to improve ties with the European Union and US, this year’s Two Sessions featured a more restrained tone, in contrast to last year’s strong statements from President Xi and the foreign minister. Top diplomat Wang Yi criticised Washington for its technology restrictions but also made a “direct appeal” for cooperation with the US.

    However, Beijing’s long-term strategy points to escalating competition with the US, as China intensifies efforts to become a tech superpower and take a more assertive role on the world stage. The latter intention is reflected by new language in Li’s report, which calls for an “equal and orderly multipolar world” and reform of global governance, in contrast with the previous year, when the aim was to “uphold the international order.”

    This approach may cause friction with the West but aligns with Beijing’s growing focus on the Global South. China’s export and investment flows are broadly shifting from advanced economies to emerging markets. In 2023, ASEAN remained China’s largest trading partner, and Russia rose to become China’s fifth-biggest single-country trading partner, up from ninth in 2020. While China’s trade grew with Brazil and India, it declined with the EU and the US.

    Xi and the Party ever-more dominant   

    Perhaps the biggest surprise of this year’s Two Sessions was the announcement that China’s premier would no longer hold the customary press conference at the end of the meetings, ending a practice in place since the 1990s. Despite being carefully stage-managed, this annual presser stood as the only time a top leader regularly answered reporters’ questions about the state of the country.

    Alongside a legal amendment that further codifies the Party’s control over the State Council, the government cabinet headed by the premier, the cancellation of the media briefing points to increasing opacity and centralisation of power under Xi and the Party. Xi’s name appeared in the work report 16 times, the highest count since he assumed power in 2012. The report attributed government achievements to Xi and described him as “at the helm charting the course,” recalling Mao’s moniker the “Great Helmsman”. There is no sign that China’s current difficulties have weakened Xi’s position or his conviction in his chosen course for the nation.

    The business implications

    Foreign investment environment

    The Two Sessions revealed contrasting trends shaping China’s foreign investment landscape. On one hand, Beijing renewed the campaign to rebuild confidence among local and foreign investors by enhancing the business environment and creating a unified national market. The work report contained new language recognising the role of MNCs in China’s modernisation, and pledges to increase market access for public procurement, telecoms, and medical and other service sectors. Premier Li also called for measures to make it easier for foreigners to work and travel in China. During the Two Sessions, it was announced that the 15-day visa-free entry policy would be extended to another six European countries (Austria, Belgium, Hungary, Ireland, Luxembourg, and Switzerland). There also will be steps to improve foreigners’ access to China’s ubiquitous mobile payment platforms.

    The legislative agenda includes drafting a law to promote the private sector, aiming to level the playing field for domestic private firms vis-à-vis their state-owned counterparts. The push to support the private sector should have benefits for MNCs but also may give local entrepreneurs more influence over policy.

    Broader political trends, such as the Party’s dominance and focus on national security, complicate the operating environment for foreign investors. The continued shift of power from state to Party organs will tend to make top-level policymaking more opaque and politicised. Premier Li did hint that officials should do more to ensure that national security concerns do not unduly impact businesses. However, while the security-first agenda was somewhat toned down compared to last year, it continues to create challenges for MNCs.  For example, it is getting more difficult to get reliable information about the Chinese market, given the tightening of national security laws and Beijing’s efforts to shape positive narratives about the economy. The fast-tracking of a new local national security law in Hong Kong has raised some concerns within the city’s business community. Last week, the city wrapped up a month-long public consultation on the home-grown security bill, mandated under Article 23 of Hong Kong’s Basic Law, or mini constitution. The bill then sped through the first two readings in the legislature, and Hong Kong lawmakers are reviewing the draft in committee this week.

    Technology competition and geopolitical risk

    Beijing’s well-funded and increasingly sophisticated industrial policy will hasten the emergence of Chinese firms that will potentially clash with the interests of the US and EU.

    The rise of Chinese EVs is a sign of things to come and BYD-equivalent firms are likely to emerge in more sectors in future years. MNCs may find themselves entangled in the crossfire as policymakers in advanced economies take action against Chinese exports, and China expands its legal toolkit for defence and retaliation.

    These risks are driven as much by Washington and Brussels as by Beijing. To gauge the potential impact on markets, it is crucial to understand the dynamics and interplay of trade and de-risking policies, as well as the corresponding risk-mitigation strategies of global firms, especially “supply chain architects” like Apple or Huawei.

    The Chinese government is adopting a more systematic and fine-grained approach to self-sufficiency, going sector-by-sector and enlisting local firms and industry associations to identify and overcome gaps in indigenous capabilities. Likewise, investors need to apply a granular lens to supply chains to identify potential impacts on specific links and components. There will be opportunities for MNCs that can contribute to China’s tech goals and innovation. However, the ultimate aim is to render foreign suppliers unnecessary.

     The “next China” is still China

    Despite the risks, China remains an essential market for many companies. Even with a conservative 2% annual GDP growth for the next decade, China’s cumulative growth will be equal to India’s entire GDP today. At 5% growth, China’s expansion matches the economies of India, Japan, and Indonesia combined. The latest AmCham China survey shows gradually improving optimism about the Chinese market among US firms, and many global leaders are doubling down on their investments [6]. As Foreign Minister Wang Yi said in his press conference, for many businesses, “The next China is still China”.

    To thrive in this complex market, MNCs must adapt and grasp evolving risks and opportunities driven by Beijing’s policy agenda. Promising markets include those benefiting from both policy tailwinds and long-term structural trends like the growth of China’s lower-tier cities, the middle class, and ageing population, and the nation’s integration with the Global South. Meanwhile, the renewed drive to net zero is a boost for solutions that reduce emissions from industry, buildings, and transport.

    Risk profiles vary widely within and across sectors. Some, like consumer goods, are less affected. Others, like software for state-linked clients, have an expiry date. Investors need a forward-looking perspective on the likely winners and losers from de-risking and China’s goal of building a self-sufficient high-tech economy. As a neutral global business hub, Singapore is well-placed to benefit from aspects of decoupling, including the relocation of production and regional functions by both foreign and Chinese firms. Nations with good access to the US and EU markets, such as Hungary and Mexico, will see investment from Chinese firms seeking to navigate rising trade barriers. German manufacturing is perhaps the sector that overlaps most closely with Beijing’s industry goals. This offers collaboration opportunities for German firms but also pressure from Chinese competitors and potential trade frictions.

    What’s next?

    Looking ahead, as Beijing continues its campaign to win over foreign investors and business travel to China becomes easier, 2024 is an opportune window to engage local stakeholders and explore new prospects in the Chinese market.

    In the coming months, ministries and local governments will formulate policies to realise the ambitious modernisation agenda outlined at the Two Sessions. Investors should closely observe the implementation of these directives and the allocation of funds from massive state-backed innovation funds.

    Another thing to keep an eye on for this year is the Party’s long-awaited Third Plenum, expected to introduce a comprehensive reform package aimed at further transforming the Chinese economy in the years to come.


    Advanced manufacturing will be highly impacted by China’s push for high-tech status. The emphasis on advancing domestic capacity without corresponding efforts to boost domestic demand suggest the persistence of overcapacity that has affected chemicals and other materials. Nevertheless, there is a promising demand for green solutions and opportunities for suppliers to align with China’s growing role as a high-tech export hub, particularly for emerging markets.

    In the digital and IT realm, Beijing’s focus on technology and national security presents a complex scenario. On one hand, it stimulates demand for tools facilitating industrial digitalisation such as digital twin and smart factory solutions. It also accelerates the growth of China’s native tech ecosystem, creating market vitality and openings for new services and business models. However, the localisation drive poses challenges for foreign companies, particularly in areas like enterprise software. There are also concerns about the long-term interoperability of the global and local systems that MNCs depend on. Additionally, while China is easing rules on data export for non-sensitive sectors, the forthcoming amendment to the Cybersecurity Law introduces uncertainty about future compliance requirements

    Consumer goods and services appear poised for robust growth, building on momentum from 2023. The work report didn’t deliver the broad consumer stimulus measures some had hoped for, but it did outline some piecemeal measures, like a new program encouraging consumers to upgrade to new cars and home appliances. Tourism numbers have surged during recent public holidays, although per capita spending remains modest as consumers prefer value-for-money options. Finally, a significant new policy targeting the development of China’s “silver economy,” which could be worth USD 4.2 trillion by 2035, bodes well for products and services catering to the ageing population.[7]

    Healthcare stocks experienced a surge in mainland China as officials pledged policies to enhance elderly care and enhance medical services. Despite cost pressures on foreign pharmaceuticals and med-tech from volume-based procurement and payment reforms, innovative therapies continue to be a growth area with the development of accelerated approval pathways and early access programs in Hainan and the Greater Bay Area (GBA).

    Financial services stand to benefit from Beijing’s determination to pivot away from property, which currently ties up around 70% of household wealth. The government wants to develop a modern financial services ecosystem to absorb and channel more of these savings towards supporting China’s modernisation. Officials recognise that this is an area where foreign firms can help and pledged to further open financial services. China’s new securities regulator, recently appointed after turbulence in the markets, promised better protection for investors and “quality IPOs” in China.

    [1]  The “Two Sessions” refer to annual gatherings of the National People’s Congress (NPC), China’s legislature, and the Chinese People’s Political Consultative Conference (CPPCC), its affiliated advisory body.  At the Two Sessions, leaders reveal policy directions for the year in government work reports, delegates discuss policy proposals, and the NPC reviews key laws.

    [2] This brief presents key outcomes from the Two Sessions, including work reports by the premier, National Development and Reform Commission (NDRC), and Ministry of Finance, as well as comments by senior officials at the Two Sessions and other policies released in the run up to the meetings.

    [3] The original budget deficit target for 2023 was 3.0%, though this was raised to 3.8% later in the year.

    [4] https://www.iea.org/data-and-statistics/charts/solar-pv-manufacturing-capacity-by-country-and-region-2021

    [5] https://www.iea.org/energy-system/renewables/wind

    [6] AmCham China 2024 China Business Climate Survey

    [7] https://www.bloomberg.com/news/articles/2024-01-16/china-unveils-plan-for-massive-silver-economy-to-serve-elderly

    Asia House closely monitors economic and policy developments in China. If you would like to discuss these issues with one of our experts, please contact Katie Reid, Stakeholder Engagement Associate: katie.reid@asiahouse.co.uk.