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Chinese Premier Li Keqiang Presents Annual Government Work Report at Opening of National People’s Congress

On Sunday, Chinese Premier Li Keqiang kicked off this year’s session of the National People’s Congress (which together with the Chinese People’s Political Consultative Conference make up the “Two Sessions”) by delivering the annual government work report, described by some as China’s version of the State of the Union address. The report is noteworthy for what it tells us about the Chinese government’s top policy priorities for the coming year.

Li announced a wide array of economic and foreign policy goals for 2017, including more economic restructuring and reform, a public promise to reduce air pollution, revamped anti-poverty efforts, and a more prominent role for China on the global stage. His presentation was widely watched for, among other things, the government’s official GDP growth target for the year, which was set to “around 6.5%.” This is slightly lower than last year’s target of 6.5-7% and 2016’s 7%, showing acknowledgment of the continuing economic slowdown due in part to weaker global demand and planned structural reforms. Li also called for a “prudent and neutral” monetary policy for 2017, echoing the sentiments of the Central Economic Work Conference, at which top leaders discussed economic policy in December 2016.

On the domestic front, Li announced a wide swath of economic goals, including cutting steel overcapacity, creating 11 million new jobs, and tamping down speculation in the housing market while supporting the purchase of homes for personal use—particularly for migrant workers moving to urban centers. (However, on Saturday, a Chinese official conveyed that plans for a nationwide real estate tax—which would have helped cool down speculation—have been put on hold due to “resistance from all sides,” potentially referring to pressure from local governments that rely on land sales revenue for funding.) Refuting “protectionism in all its forms,” Li promised a better environment for foreign investors, including greater access to the services, manufacturing, and mining sectors, as well as a role for foreign investors in national science and technology projects. This follows some mixed-ownership reforms for state-owned enterprises (SOEs) this year, in which foreign investors were encouraged to get involved as stakeholders, albeit in a limited way. Li also stated that additional reforms of SOEs and their assets were in order. Furthermore, promising reductions in air pollution, he announced around-the-clock observation of heavy polluters, reductions in coal output and emissions from coal-fired power plants, and a transition away from the use of coal and towards natural gas.

On the foreign policy front, Li laid out a roadmap to a more confident and internationally prominent China. He promised greater Chinese involvement with global governance, international trade, and peacekeeping efforts. In particular, he mentioned naval escorts on the high seas, which, together with calls to strengthen China’s maritime defense and an increased military budget, appear to indicate a more assertive blue-water naval presence moving forward. While Li did not mention specific figures related to military spending, a Chinese official announced on Saturday that the military budget would increase by 7%, a smaller increase than in previous years. With regard to Hong Kong and Taiwan, Li emphasized unity, reiterating last year’s key phrases of “one country, two systems” and a “high degree of autonomy” for the two regions, but in an unprecedented move, he explicitly denounced the idea of independence for Hong Kong. Li also mentioned upholding the “One China Principle,” which, for the past three years, had not appeared in the government work report.

Last year (and in previous years), Li touched on many of the same themes, particularly the housing market and SOE reform, neither of which have seen much movement over the past year. This may reflect internal difficulties with policy implementation. There have been successes as well. According to SCMP, the Chinese government met all of its GDP growth, job creation, and poverty alleviation targets for 2016.

After the annual work report was presented, two other government reports concerning the economy were released: the National Development and Reform Commission’s Draft Plan for National Economic and Social Development (WSJ) and the Ministry of Finance’s Budget Report (WSJ). As the NPC and the overall “Two Sessions” continue, we are likely to see additional signals with regard to Beijing’s plans for the upcoming year, potentially concerning the upcoming senior leadership reshuffle in the Fall, when the 19th Party Congress will elect the new Politburo Standing Committee and other top leaders.

For more detail, read the full text of the government work report made available by the Wall Street Journal in its original Chinese and in translated English.

© 2017 Covington & Burling LLP

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About this Author

Ashwin Kaja, Covington Burling, beijing attorney, international trade lawyer
Associate

Ashwin Kaja is an associate in the firm’s Beijing office and is a member of the firm’s International Trade, Public Policy & Government Affairs, and Data Privacy & Security practice groups. He has advised multinational companies, governments, and other clients on a range of matters related to international trade, public policy and government affairs, data privacy, foreign investment corporate law, real estate, and the globalization of higher education. Prior to joining the firm, Mr. Kaja was an associate at another major international law firm in Beijing.

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