This article was written by Andrew Fei and Stella Wang.
On 22 May, the Chinese government unveiled its economic and social development blueprint for the year head – the 2020 Government Work Report (政府工作报告). This article provides a high-level overview of the key takeaways from the perspective of foreign investors.
Each year, the annual Government Work Report is delivered to Chinese policymakers at the “two sessions” – the biggest event in China’s political calendar. The “two sessions” refers to the annual plenary sessions of the National People’s Congress (全国人民代表大会), China’s top legislative body, and the National Committee of the Chinese People’s Political Consultative Conference (中国人民政治协商会议), China’s top political advisory body.
During the two sessions, around 3,000 national legislators and 2,200 national political advisers travel to Beijing to review central government work reports, China’s annual budget and discuss matters of national and international importance.
As with previous years, the 2020 Government Work Report reviews China’s development in 2019 and sets out, at a high-level, China’s economic and social development agenda for the year ahead.
Key takeaways for foreign investors
The 2020 Government Work Report touches on almost every aspect of Chinese economy and society, and is a must-read for foreign investors that wish to have a better understanding of where China is heading towards.
The policy measures outlined in the 2020 Government Work Report will deliver important reforms and, with them, potential opportunities, to local and international businesses operating in China and around the world.
Should you wish to discuss what the 2020 Government Work Report means for you or your business, please contact a member of our cross-border team. In the meantime, we have set out some of the key takeaways from the perspective of foreign investors.
No GDP growth target, but numerous other macroeconomic goals
Unlike in previous years, the 2020 Government Work Report does not include any specific targets for economic growth. However, the report does contain a number of quantitative and qualitative macroeconomic goals, including:
- creating over 9 million new urban jobs, maintaining a surveyed urban unemployment rate of around 6% and a registered urban unemployment rate of around 5.5%
- removing excessive restrictions on employment and adopting all possible measures to promote employment
- targeting a CPI increase of around 3.5%
- achieving more stable and higher-quality imports and exports and maintaining a basic equilibrium in the balance of payments
- providing RMB 2 trillion (of which RMB 1 trillion yuan will be raised through the issuance of COVID-19 government bonds) to local governments to facilitate employment, cut taxes and government fees, reduce rental payments and interest payments and increase consumption and investment
- using a variety of monetary policy tools (e.g., required reserve ratio reductions, interest rate cuts and re-lending) to grow the money supply and aggregate financing
- keeping the RMB exchange rate at a generally stable and balanced level
- developing new monetary policy tools that directly stimulate the real economy and ensure businesses can obtain loans more easily
- effectively preventing and controlling major financial and systemic risks
- increasing agricultural production
- working towards poverty elimination
- promoting cleaner and more efficient use of coal; developing renewable energy; improving systems for the production, supply, and sale of oil, natural gas, and electricity; strengthening China’s energy reserve capacity; and safeguarding China’s energy security
- maintaining overall economic and social stability
According to the 2020 Government Work Report, China is committed to opening its doors wider to the world, keeping its industrial and supply chains stable and making opening-up a catalyst for reform and development, including through the following measures:
- significantly shortening China’s negative list for foreign investment
- formulating a negative list for cross-border trade in services
- granting greater autonomy to pilot free trade zones in terms of reform and opening-up
- coordinating development of the Guangdong-Hong Kong-Macao Greater Bay Area, the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Yellow River basin and the Chengdu-Chongqing economic circle, old revolutionary base areas, ethnic minority areas, border areas and impoverished areas
- accelerating the establishment of a free trade port in Hainan
- opening new pilot free trade zones and integrated bonded areas in the central and western regions of China
- accelerating the growth of cross-border e-commerce and other innovative businesses
- fostering a market environment in which all companies, Chinese and foreign, are treated as equals and engaged in fair competition
International trade and outbound investments
In addition to further opening up the domestic economy, the 2020 Government Work Report also supports further international cooperation, including by:
- focussing on quality, market principles and international rules in jointly pursuing Belt and Road projects for mutually beneficial outcomes
- promoting the healthy development of Chinese outbound investments
- working towards the signing of the Regional Comprehensive Economic Partnership
- advancing free trade negotiations with Japan and South Korea
- working with the United States to implement the China-U.S. Phase One Trade Deal
- safeguarding the multilateral trading regime and actively participating in WTO reforms
Supporting businesses and improving the business environment
In the aftermath of COVID-19, China is doubling down on its efforts to support businesses (especially SMEs), including through the following measures:
- delivering more than RMB 2.5 trillion of additional cuts to taxes and government fees in 2020
- extending to March 2021 the policy of allowing micro, small, and medium-sized businesses to postpone principal and interest payments on their loans
- encouraging banks to increase lending to micro and small businesses and at lower interest rates
- supporting businesses to increase bond financing
- supporting the resumption of work, production and business activities while continuing to implement COVID-19 control and prevention measures
- providing access to more online government services
- ensuring that private businesses have equal access to factors of production and policy support
- improving market-based investment and financing mechanisms to support private businesses to participate in major projects on an equal footing
- reviewing relevant regulations to abolish those that unfairly differentiate businesses according to their form of ownership (e.g., private or government-owned)
Innovation, technology and the digital economy
The COVID-19 experience has demonstrated the potential and resilience of China’s digital economy. In terms of innovation and technology, the 2020 Government Work Report includes the following measures:
- increasing lending to manufacturers and promoting the industrial internet as well as smart manufacturing
- introducing new policies to support science and technology, innovation, e-commerce, online services, the digital economy and 5G implementation
- encouraging businesses to increase investments in research and development
- strengthening intellectual property protection
- supporting the roll-out of e-commerce and express delivery services in rural areas to strengthen consumption
- supporting venture capital investments and increasing loan guarantees for start-ups
- promoting new infrastructure (e.g., those relating to 5G networks, charging facilities for new-energy cars and industrial upgrading) and new urbanisation projects