Post COVID-19, China’s Two Sessions kick off the construction of a new development pattern in 2021

The fourth sessions of the 13th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and National People’s Congress (NPC) took place from 4 to 11 March. Although COVID-19 cases have been largely contained in China, the Two Sessions ended sooner than expected lasting for only eight days instead of the normal two-week duration.

The year 2021 is special, because it is the first year of the 14th Five-Year Plan, and China’s Communist Party will commemorate its 100th anniversary in July. More importantly, this year marks the first step of a 15-year new journey to build a modern socialist country in an all-round way (becoming a developed country by 2035), as the Chinese saying goes, “a journey of a thousand miles begins with a single step”.

PwC’s latest in-depth review of China’s Two Sessions this year Post COVID-19, China’s Two Sessions kick off the construction of a new development pattern in 2021 summarises the significance and business implications for China’s economy and businesses.

Government’s work priorities for 2021

GDP growth target has been set at above 6% which is almost 2% less than the major projected growth rate by IMF and other international organisations. This implies that quality of development will be prioritised over quantity or speed.
11 million new jobs shall be created in 2021, which is 3 million less than in 2020, but on par with 2019.
CPI growth shall be maintained at around 3%, compared to the set growth rate at 3.5% in 2020 and 3% in 2019. CPI increased by 2.5% last year.
China aims to cut its deficit to GDP ratio to around 3.2% in 2021. Meanwhile, it was set at 3.6% in 2020 due to COVID-19.
Energy consumption per unit of GDP will be reduced by around 3% which is same with 2019.
China will continue its proactive fiscal policy with enhancing the quality, efficiency, and sustainability during the post COVID-19 period. The country’s prudent monetary policy will remain flexible and kept at a reasonable and appropriate level. Loan interest rates in real terms is expected to be lowered again.
China will continue to cut tax, especially for micro and small enterprises, self-employed individuals and small-scale taxpayers.
Scientific and technological innovations shall be fully applied in the real economy to promote innovation-driven economic development. China will draft and implement the Sci-Tech Innovation 2030 — Megaprojects, and also launch projects to achieve breakthroughs in core technologies in key fields.

Implications - what are the takeaways?

Corporate executives should have a comprehensive understanding of the new stage, new development concept, and new development pattern, as these policy directives will have long-term impacts on China’s economic landscape and across many sectors.
Antitrust (anti-monopoly) and prevention of capital expansion were addressed, but in a much milder way.
Achieving carbon emissions peak and carbon neutrality in China will have a big impact on some industries but would also create business opportunities.