China opened its ‘Two Sessions,’ the annual meeting of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), on March 4.
Despite the opportunity to drive home the government’s ongoing success in controlling COVID-19 and its relatively successful economic recovery from pandemic, this year’s Two Sessions were a low-key affair. The announcement of the 14th Five-Year Plan (FYP), the guiding policy blueprint for 2021-2025, provided a framework for the government to consolidate several widely known objectives, including a desire to decrease reliance on foreign supply chains in technology, accelerate consumption, and heighten food security.
Underpinning these objectives is an increased focus on social welfare, building on last year’s declaration that poverty alleviation objectives have been achieved. A renewed emphasis on educational reform, fiscal policy adjustment, and regional development will be fundamental for the shift towards quality growth over the growth-at-all-costs model that previously guided Chinese economic development. Alongside electoral reform in Hong Kong and the announcement of increased protections for companies and individuals facing sanctions, these goals will support the government’s projection of a confident China firmly on the path to “socialist modernization” – a crucial image for the Party’s 100th anniversary this July.
The 14th FYP provides a broad range of opportunities for companies that have the knowledge and experience to support China’s development goals, especially those capable of contributing in scientific research and development, financial services, and healthcare. Throughout 2021, sectoral, ministerial, and local plans in support of the 14th FYP will be released. These blueprints will provide more tangible goals for multinationals to align with as they seek to secure their long-term position in China.
What Multinationals Need to Know
- The 14th Five-Year Plan Consolidates Existing Objectives. The 14th Five-Year Plan (FYP) enshrined many long-known government ambitions into tangible political objectives to be achieved by 2025. These include increased consumption, a heightened focus on social welfare, and the transition towards a more environmentally stable economic model.
- China Will Accelerate Investment for Tech Self-Sufficiency. Reviving the spirit of Made in China 2025, the government will increase R&D spending by more than seven percent during the 14th FYP period to improve indigenous innovation and insulate core technology supply chains from external shocks.
- The Government Targets Modest Growth for 2021. Following a year in which China was the only major economy to achieve economic growth, the National Development and Reform Commission (NDRC) announced a growth target of “above 6 percent” for 2021. The NDRC pledged to keep macroeconomic policies stable and avoid sharp turns in support of this objective.
- China to Expand Policy Toolbox Against Foreign Sanctions. NPC Standing Committee Chairman Li Zhanshu announced that China will introduce new laws combatting foreign sanctions, interference and “long-arm jurisdictions” in response to growing international efforts to push back against China on trade, technology and human rights. At the same time, Foreign Minister Wang Yi left the door open for increased cooperation between the United States and China – as long as the United States makes the first move.
- Hong Kong Faces Electoral Overhaul. The announcement of reforms to Hong Kong’s electoral system will further enhance perceptions that the sanctity of “One Country, Two Systems” has been eroded.The likelihood of increased pushback from Washington and its allies will increase uncertainty for multinationals with operations and commercial partnerships in the territory.
Read APCO’s full analysis of the 2021 Two Sessions, including sector-specific analysis and forward by James McGregor, here.