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China’s 2023 Two Sessions: Engineering a Stable Recovery

March 13, 2023

MEETING OVERVIEW

The first meetings since the 20th National Congress of the Communist Party of China (CPC), this year’s Two Sessions solidify the Party’s quinquennial power transition. President Xi Jinping has secured an unprecedented third term as president and former Executive Vice Premier Han Zheng was appointed vice president. Current Politburo Standing Committee members Zhao Leji and Wang Huning became chairman of the Standing Committee of the NPC and chairman of the CPPCC, respectively.

Aside from Li Qiang, a current member of the Party’s Politburo Standing Committee who succeeded Li Keqiang as premier, the appointments of other top officials are also relevant for the international business community. He Lifeng, a current Politburo member, has been named vice premier in charge of financial and economic affairs, succeeding Liu He. Zheng Shanjie, a former provincial leader in Fujian, Zhejiang, and Anhui, has been appointed chairman of the National Development and Reform Commission (NDRC), the country’s top economic planning agency. Incumbent Governor of the People’s Bank of China Yi Gang, Minister of Finance Liu Kun, and Minister of Commerce Wang Wentao all retained their positions.

Chinese authorities usually facilitate institutional reform of the government at the start of each new cabinet’s term to improve governance of critical and emerging issues confronting China’s development. Such reforms generally lead to the consolidation or establishment of industrial regulatory authorities. For example, the Ministry of Industry and Information Technology, the Ministry of Human Resources and Social Security, the Ministry of Transport, and the Ministry of Environmental Protection was established in 2008. In 2018, the revamp plan included the establishment or reformation of several ministries including the Ministry of Natural Resources, the Ministry of Ecology and Environment, the Ministry of Agriculture and Rural Affairs, the Ministry of Culture and Tourism, and the State Administration for Market Regulation.

This year’s institutional overhaul focuses predominantly on finance and technology in an effort to improve governance of financial stability, technological self-reliance, and data security, all of which have been highlighted as development priorities amid China’s rapid economic transformation and escalating competition with the West. Highlights of the institutional reform plan include:

  • The Ministry of Science and Technology will be restructured in a way that prioritizes strategic planning to advance China’s “whole nation” system in promoting scientific and technological innovation.
  • The National Financial Regulatory Administration (NFRA) will be established to replace the China Banking and Insurance Regulatory Commission. The NFRA will oversee financial holding companies and investor protection, two areas previously administrated by the People’s Bank of China and the China Securities Regulatory Commission (CSRC). The CSRC will be elevated to the status of an agency directly overseen by the State Council, with approval authority over the issuance of enterprise bonds, including those raised by local government financing vehicles (LGFV).
  • A national data bureau, overseen by the NDRC, will also be established. The bureau will oversee the promotion of the digital economy and strategic planning around China’s data assets, as well as improve inter-ministerial coordination on data issues. However, the Cyberspace Administration of China (CAC) will still be responsible for cybersecurity, data security, and privacy protection. The new data bureau will inherit certain responsibilities from both the NDRC and the CAC, such as developing the digital economy, coordinating China’s digital infrastructure, devising strategies for smart cities, and planning China’s digital infrastructure.

WHAT MULTINATIONALS NEED TO KNOW

  1. Economic Stability Remains the Top Priority for 2023. Global and domestic economic challenges, including inflation and faltering demand, mean China will prioritize measures to spur economic growth in the coming year. These will include policies to revive and expand consumption, mitigate financial risks, and boost business confidence.
  2. The Government Set a Cautious Growth Target Despite Easing Headwinds. After logging 3% growth in 2022, one of the worst performances in half a century, the government aims to expand GDP by “around 5%” this year. With growth indicators already showing positive signs due to the abandonment of zero-COVID, this target is below market expectations and thus widely viewed as easily attainable.
  3. Institutional Reforms Serve to Enhance Party Governance of Critical Issues. The government will restructure existing entities—such as the Ministry of Science and Technology—and establish new ones, including the National Financial Regulatory Administration, to better support ambitions for self-reliance in science and technology and limit financial sector risks. A national data bureau will also be formed to coordinate digital strategies and development.
  4. Policymakers Seek Better Coordination to Ensure Security. China faces numerous growing risks to its security both internally and externally, driven by pandemic-induced debt accumulation, looming demographic challenges, and geopolitical pressures. The government will seek to bolster its security amid a broader push to ensure stability.
  5. China Remains Committed to Pursuing Modernization, Digitalization, and Green Development. With a focus on manufacturing, China will continue to pool resources and make concerted efforts to achieve breakthroughs in core technologies in key fields. The digitalization of traditional industries and the development of the digital economy and platform economy will also continue to receive government support.
  6. U.S.-China Ties Continue to Sour as Competition Escalates. As strategic competition and targeted decoupling intensify, Beijing has increasingly criticized Washington for seeking to suppress and contain China. In his first press conference as foreign minister, Qin Gang warned of “conflict and confrontation” if the United States does not “hit the brake.” With the reopening of its border, China now seeks to accelerate its diplomacy and present itself as an alternative to Western powers.

Read APCO’s full analysis of the 2023 Two Sessions, including sector-specific analysis and a foreword by James McGregor, below and click here to download a copy.

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