Two Sessions, five quotes

Thousands of Communist Party members have descended on Beijing for China’s annual ‘Two Sessions’ political process this week. The ‘two sessions’ refer to the parallel meetings of two political bodies: 

1. The National People’s Congress (NPC), which is China’s 3,000-strong rubberstamp parliament, and
2. The Chinese People’s Political Consultative Conference, an advisory body which holds even less sway than the NPC

These meetings are more choreographed than a 1980s workout video. But as China grapples with a messy inbox (pervasive real-estate crisis, persistent deflation, and beyond), these formalities can still offer clues into China’s thinking.

A key source of clues is the government work report that China’s premier, Li Qiang (nominally the country’s number two leader), delivers to the NPC each year. It sums up last year’s wins and sets the priorities for the year ahead.

Here are five quotes from Li Qiang’s keynote that caught our eye:

1. “Achieving this year’s targets will not be easy”

Li is referring in part to this year’s GDP growth target of “around 5 per cent” – the same as last year’s target. That figure is what most China watchers expected, which, said another way, is the minimum target China could set without spooking markets. It’s an attempt to pump up confidence while managing expectations.

2. “Insufficient demand, overcapacity in some industries, weak societal expectations and many lingering risks”

Here Li was listing reasons why “the foundation for the continuous recovery and improvement of our country’s economy is still not solid”. Many observers would likely agree with (if not add to) that list.

But the real debate isn’t about what ails China’s economy, but rather the cure. To that end, Li announced $139B in special bonds to ramp up central stimulus while taking pressure off local governments.

And yet the market’s ‘meh’ response suggests one of two things: either the market wants more stimulus, or it thinks more stimulus is simply papering over China’s more fundamental economic problems.

And that brings us back to the diagnosis: the above list arguably reflects symptoms of a much deeper malady, stemming from China’s unique economic model.

3. “Regional hotspot issues keep erupting. This has made China’s external environment more complex, severe, and uncertain”

Compared with last year, China is painting a less strident and more nuanced picture of the outside world.

But the question is whether this is just a tactical shift in rhetoric to calm tensions abroad and focus on problems at home, or whether China is shifting its aims.

One way to answer that is to look at whether there’s been a parallel shift in China’s actions. Sure, Presidents Xi and Biden tried to kiss and make up last year, but while Premier Li was delivering his speech yesterday, China was again firing water cannons at Philippine vessels in the South China Sea.

4. “We will promote the peaceful development of cross-Strait relations, be firm in advancing the cause of China’s reunification”

Last year’s report used the phrase “peaceful reunification” with Taiwan, whereas this year’s wording seems to (if you squint a bit) dial back that language a little.

But it’s important not to over-index on this stuff – it’s not the first time China has removed these words, and it probably reflects China’s irritation that Taiwan’s people voted for another independence-leaning government in January.

It could also be a way to counterbalance the more nuanced tone in Li’s other quotes; a way of saying ‘yes, we’re lowering the temperature, but that doesn’t mean we’re letting Taiwan go’.

5. “The armed forces will … devote great energy to training under combat conditions”

It’s always interesting to see an emphasis on “combat conditions” as a signal that China’s not playing around. But again, it’s not the first time we’ve seen this formulation.

Many commentators say this is Xi Jinping’s way of making sure Chinese generals don’t get complacent. After all, China hasn’t fought a full-scale war since its brief but bloody 1979 invasion of Vietnam. Xi has good reason to worry too, given recent reports of corrupt generals fuelling rockets with water.

INTRIGUE’S TAKE

Overall, we see no major shifts, but rather a continuation of three trends.

First,China’s opaque vibes look less like an attempt to obscure its economic plans, and more like genuine uncertainty about what its plans actually are.

Second, Premier Li’s movements this week – whether mentioning his boss’s name a record 16 times, or ending a three-decade-long tradition by not hosting a press conference this year – show that President Xi Jinping is continuing to centralise and solidify his control.

But third, there’s tension between these first two trends. If Xi can’t address China’s problems, he’ll increasingly bear the responsibility for them. And that could raise the chances of Xi facing some kind of internal challenge.

But of course, given China’s opaque system, we may never know.

Also worth noting:

• We’re also watching to see if China will announce a new foreign minister. The previous foreign minister’s resignation was formally accepted last week, eight months after he disappeared from public view amidst rumours of an extramarital affair and/or being caught up with foreign intelligence agencies. His replacement Wang Yi is currently straddling two jobs in what’s widely seen as a temporary fix.
• If China names a new foreign minister, speculation is it’ll very likely be the Oxford-educated Lui Jianchao, a former ambassador to Indonesia and the Philippines. Folks say he’s charming and impressive, presenting a friendlier face to a China-wary world.
• The ‘Two Sessions’ formalities wrap up on 11 March.