Recap of China’s Two Sessions meeting

China’s Two Sessions legislative summit concluded earlier this month. The Government Work Report from the legislative meeting shined a light on the country’s policy direction in 2022 with a focus on sustaining economic growth and enhancing self-sufficiency while also promoting overall social welfare.

China has been weathering an increasingly complex environment in recent months marked by pandemic resurgence, slow economic recovery, and volatile commodity price fluctuations arising from the Russia-Ukraine conflict. Apart from local COVID-19 outbreaks in various major cities, China’s economy is suffering from lagging consumer spending and investment, concerns around energy security and supply of raw materials, unstable export demand and increased pressure of imported inflation.

During the meeting Premier Li Keqiang announced the country’s 2022 GDP growth target of 5.5%.¹ Although this is the lowest target that has been set for the country since 1991, it is still higher than many economists had anticipated.

To achieve the ambitious growth target, policymakers cited plans for fiscal spending and tax cuts. They will also look to encourage infrastructure investment and relax restrictions on the housing market as well as enhance current COVID-19 policies to boost consumption demand. Investors can expect somewhat looser monetary policy going forward and talks of another cut in the medium-term lending facility (MLF) rate is widely anticipated in the coming months.²

Government officials also raised the following key policy objectives:

• Emphasis on stability and promoting self-reliance specifically in key technologies such as semiconductor chips and food security;
• Increase in financial stimulus to private companies particularly SMEs;
• A continued focus on Common Prosperity policy to expand social welfare services and improve social mobility;
• Upholding carbon commitments while still prioritizing energy security in the short term;
• Maintaining strict border controls to adhere to the country’s zero-COVID policy.