China’s ‘Two Sessions’: Growth Target Difficult, More Guns Pointing at Taiwan

Members of the People's Liberation Army Band leave after the opening of the National People's Congress, China's rubber-stamp legislature, at the Great Hall of the People in Beijing on March 5, 2024. (Kevin Frayer/Getty Images)

Commentary

Beijing set the same 5 percent growth target during its annual Two Sessions gathering, but there has been no COVID-19 hat trick to bolster the numbers.

The Two Sessions, which began on March 4, consists of two concurrent meetings: China’s rubber-stamp legislature, the National People’s Congress (NPC); and the Chinese People’s Political Consultative Conference. The purpose of the meetings is lawmaking and policy setting. The NPC reviews and approves new laws and government work reports detailing the progress of various departments. It is also a time when officials are appointed to various positions within the government.

The part of the meeting that has the most impact on the United States and the rest of the world is the economic and social planning. Here, goals for the coming year are established, including economic growth targets and social development priorities.

While the meetings are intended to be consultative, they are predominantly a symbolic display of national unity and a platform for the Chinese Communist Party (CCP) to showcase its plans and priorities to the public. The NPC comprises approximately 3,000 delegates from across China who convene ostensibly to discuss and formulate annual targets. However, in practice, all decisions have been predetermined. The NPC sessions primarily entail formally endorsing these targets and presenting them to the public. Afterward, the delegates’ main focus is figuring out how to achieve those targets within their provinces.

The GDP growth target has already been established—set at 5 percent. Defense spending has increased by 7.2 percent, leading many to believe that CCP leader Xi Jinping is doubling down on his commitment to modernize the People’s Liberation Army (PLA) by 2027. The increased defense spending bodes ominously, as Premier Li Qiang removed any mention of “peaceful reunification” with Taiwan in his report.

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In achieving the 5 percent growth target, Xi is facing an uphill battle. Strained relations with the United States, the European Union, and China’s neighbors impact trade and investment. Domestically, the property market is crashing, posing a threat to the financial system and the banks holding potentially distressed loans.

Chinese citizens no longer have the disposable income they once did, and they can’t afford the large-screen TVs, appliances, and cars that drove the pre-pandemic consumer market. Last year, Beijing ceased publishing data on youth (ages 16 to 24 years old) unemployment, which stood at 21.3 percent in June 2023. With university graduations imminent in just a few months, an additional 10 million or more young people will enter the job market.

The era of double-digit growth, now a decade behind, is not coming back.

Given all of its economic issues, it’s unclear how Beijing believes it can achieve the 5 percent growth target. Last year, lifting the COVID-19 restrictions provided a boost to an economy already in the doldrums. This year, the economy is larger, and no single decision that Xi could make could provide a significant boost.

Mr. Li said that the CCP would likely proceed with a plan to construct subsidized private homes as a resolution to the property crisis. However, this would serve as a temporary band-aid solution at best. History has demonstrated that government involvement in housing projects causes inefficiency because of bureaucracy and corruption, potentially resulting in higher costs and lower-quality construction.

Government subsidies will also cause market distortion. The increase in supply will drive down the price of existing homes, potentially resulting in negative equity, where the loan amount exceeds the property’s market value. This situation could lead to mortgage defaults, impacting lenders and the broader financial system.

If Beijing subsidizes housing, it will likely do so by raising taxes or increasing debt. However, an increase in taxes would dampen economic activity and reduce disposable income for citizens. Moreover, China’s debt-to-GDP ratio is already high—at 287.8 percent in 2023. Further increasing debt could potentially lead to future instability.

Ironically, in his presentation, Mr. Li stressed the importance of communicating economic data to the public. However, the premier’s news conference, an annual tradition, was canceled, raising questions about CCP confidence. On one hand, the ambitious 5 percent growth target may signal Xi’s confidence in his ability to revive the economy, while the increased military budget suggests a willingness to spend. On the other hand, canceling the premier’s press conference may suggest that Xi doubts his ability to grow the economy and believes he can better control the messaging by not allowing the media to question the premier publicly.

While the question of whether China will achieve its growth target remains uncertain, the risk to Taiwan appears to have heightened. Xi’s increase in military spending and the removal of any mention of “peaceful” reunification with Taiwan both suggest potential preparation for conflict. Furthermore, Beijing’s historical fixation on achieving its GDP growth target raises concerns about whether Xi would resort to starting a war, possibly to find a scapegoat for a potential recession in China.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.