China’s annual session of its two-chambered rubber-stamp legislature this week, known as the “Two Meetings,” is likely to double down on pro-growth policies unveiled last year, while eschewing more daring moves to make good on perennial promises to restructure the fiscal system and redistribute income from governments and corporations to households. This conservative stance may seem smart amid significant international turmoil, especially as China can play up its technological achievements over the past few years.
Unfortunately, staying the course on Beijing’s current economic policy direction doesn’t grapple enough with how this lack of domestic reform will reinforce the external limits on China’s growth model. That model, based largely on manufacturing in lead sectors, deprives foreign markets of the benefits of more spendthrift Chinese consumers, while intensifying the external impact of overcapacity and Chinese exporters’ disproportionate competitiveness.
In their sessions this week, the National People’s Congress, or NPC, and the Committee of the Chinese People’s Political Consultative Conference, or CPPCC, are likely to continue in the same vein as last year, with renewed emphasis on the economy and stimulating domestic demand. They will continue to show love to the private sector through a new law, the Private Economy Promotion Law, which aims to signal more political support and protection for private business. The private economy has long been protected through a constitutional amendment in 2004, so this new law is more symbolic than a game-changer. But it aims to curtail local government’s attempts to unfairly tax or fine private firms in order to raise revenue, amid ongoing budgetary constraints due to high levels of public debt and the collapse of the property sector, which had long been the source of local government revenue.