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China's NPC to hear Li Qiang's plan for economic recovery

Dang Yuan
March 1, 2024

China's economy is spluttering, as nearly 3,000 lawmakers are set to meet in Beijing for the National People's Congress. Prime Minister Li Qiang will face some tough questions.

China's Premier Li Qiang speaks during the China International Import Expo opening session in Shanghai last year
Chinese Premier Li Qiang seems determined to reboot the world's second-largest economyImage: Lukas Coch/AP/picture alliance

Chinese Prime Minister Li Qiang is an unshakable optimist. When he talks about the economy, he often uses weather metaphors as a signal that — eventually — everything will be alright. Addressing German businesspeople last summer in Berlin, he promised them "a rainbow" amid global economic downturn.

"When it rains hard, it gets muddy. But we must not bow our heads," said Li. "Keep your chin up! When the time comes, we will surely see a rainbow. The economy has a natural cycle, in China as well."

And Li seems determined to reboot the world's second-largest economy and make it fair, competitive and sustainable.

The global situation, however, is getting worse. Countries are increasingly turning to protectionist policies and global demand is dwindling. Even China's internal economic indicators are pointing downwards. The country's real estate industry is in ruins after construction giant Evergrande was forced to close, depriving the nation of its main engine for growth.

Internal demand for goods remains lackluster. Consumers prefer saving money to spending it, and prices are dropping. Experts warn of deflation, which — seen from a countrywide perspective — could be even more dangerous than inflation. During deflation, people often hold off on major purchases in hopes that prices will drop even further. Investors are cutting back on investments, and unemployment is rising.

Chinese economic slowdown overshadows Lunar New Year

And just ahead of the Lunar New Year in February, the CSI300 stock market index dropped to a five-year low. Beijing responded by replacing the top leaders of the stock market supervisory body. The index, which is based on trading in Shanghai and Shenzhen, has somewhat recovered since then.

Searching for Li's 'rainbow'

Now, Li Qiang is due to present a comprehensive report to the National People's Congress, the plenary session of the Chinese parliament, which will meet in Beijing next week. Nearly 3,000 delegates will be waiting to hear the prime minister's plan to correct the course of Chinese economy.

The magic threshold is 5% growth per year. In 2023, China's gross domestic product grew by 5.2%. This year, meeting that threshold seems like a Herculean task. At the end of January, the authorities tried to sugarcoat a bitter message coming from nearly half of China's 31 provinces. In an official statement, they said that "13 provinces have raised their growth targets compared to the real percentage GDP growth in 2023."

However, 13 others have reduced their growth goals, and the remaining five hope to stay at the same growth level as last year, around 5%.

Quo vadis, China?

The Chinese people are expecting answers from Li, who only took the office a year ago. At the last day of the Beijing conference, he is due to meet international press. The conference will be broadcast live with simultaneous translation in English. It has already been planned down to the smallest detail, including who gets to ask questions. But the interest for what Li might say remains high.

China: Economic friend or foe?

With the real estate market in crisis, internal consumption must serve as a way out, said Jinny Yan, chief China economist at the London-based and Chinese-owned ICBC Standard Bank.

"Consumer confidence in China dropped once again in the last quarter of 2023," she said at a conference in Frankfurt. "Reviving consumption remains key for growth."

Billions flowing from Germany

Chinese politicians seem to be considering another way of boosting growth — by funneling more money from abroad through foreign direct investment. Even today, China needs foreign capital and know-how, especially in less developed provinces.

The German economy plays a major role in this plan. According to the German Bundesbank, German business set a record last year by investing nearly €12 billion ($13 billion) via foreign direct investment into China.

In December, Beijing unilaterally lifted visa requirements for citizens of Germany and several other EU nations who are planning to stay in China for 15 days or less. The visa liberalization for Germany, France, the Netherlands and Italy is set to stay in force until the end of 2024. Irish and Swiss nationals were added to this list in January.

Jens Eskelund, the head of the European Union Chamber of Commerce in China, praised the liberalization as a "concrete and practical improvement" for investors.

"China is really open for business," Eskelund told Germany's business newspaper Handelsblatt.

"Decoding China" is a DW series that examines Chinese positions and arguments on current international issues from a critical German and European perspective.

The article was originally written in German.

Edited by: Shamil Shams