China's Economic, Policy, and Geopolitical Priorities for 2024 and Beyond
The National People’s Congress (NPC) of China and the Chinese People’s Political Consultative Conference (CPPCC) – on paper, China’s top legislative and advisory bodies – concluded their 2024 annual plenary sessions on March 11. Referred to as the “Two Sessions” (aka. Lianghui), this year’s meetings came amidst a difficult economic recovery and ongoing geopolitical headwinds. What follows is a roundup of key takeaways on what the Two Sessions signaled on GDP growth, consumption, real estate, science and technology, governance, and geopolitics.
Trusted Insights for What’s AheadTM
Mixed economic messaging. Current market conditions and the sum of stimulus measures announced to date means China will be hard-pressed to meet its official growth target of “around 5 percent”, leading to speculation about if and when more substantial stimulus might come. As things currently stand, we forecast that China will grow by 4.6 percent this year.
- Even if stimulus were to be increased, the economic headwinds that China is currently facing are underpinned by deep-rooted structural imbalances that will take time to be addressed. This is generating changes in consumption behavior and spending patterns, and in the way competition takes place – especially by local players. Capturing the significant opportunities that the Chinese market presents not only requires MNCs to rethink how to compete in order to win, but also to reassess growth and profit expectations. To be sure, there will be differences sector-to-sector, with those considered “strategic” likely benefiting from increased regulatory hospitality. Still, a recalibration of strategies will be necessary to compete and succeed in this new reality. As global HQs and their China organizations align on how to do this, adapting the experience and know-how acquired in other geographies that have gone through periods of economic stress can help hone key operating competences.
Rallying around New Productive Forces. This “new” concept refers to the technologies necessary for China’s innovation-led growth and industrial upgrading and underscores China’s ambitions: industrial growth driven by innovation and technological advances that will not only support self-sufficiency and national security goals, but also create global competitiveness in strategic areas.
- Navigating the fallout from geopolitical and trade issues will remain a challenge for MNCs. Looking ahead, China will likely continue to focus on export-related diplomacy, but will push back hard against any (real or perceived) moves by other governments to further restrict exports in strategically important industries. This increases the risk that MNCs may land in the crossfire of geopolitical developments, and government policies and regulations.
China's Economic, Policy, and Geopolitical Priorities for 2024 and Beyond
The National People’s Congress (NPC) of China and the Chinese People’s Political Consultative Conference (CPPCC) – on paper, China’s top legislative and advisory bodies – concluded their 2024 annual plenary sessions on March 11. Referred to as the “Two Sessions” (aka. Lianghui), this year’s meetings came amidst a difficult economic recovery and ongoing geopolitical headwinds. What follows is a roundup of key takeaways on what the Two Sessions signaled on GDP growth, consumption, real estate, science and technology, governance, and geopolitics.
Trusted Insights for What’s AheadTM
Mixed economic messaging. Current market conditions and the sum of stimulus measures announced to date means China will be hard-pressed to meet its official growth target of “around 5 percent”, leading to speculation about if and when more substantial stimulus might come. As things currently stand, we forecast that China will grow by 4.6 percent this year.
- Even if stimulus were to be increased, the economic headwinds that China is currently facing are underpinned by deep-rooted structural imbalances that will take time to be addressed. This is generating changes in consumption behavior and spending patterns, and in the way competition takes place – especially by local players. Capturing the significant opportunities that the Chinese market presents not only requires MNCs to rethink how to compete in order to win, but also to reassess growth and profit expectations. To be sure, there will be differences sector-to-sector, with those considered “strategic” likely benefiting from increased regulatory hospitality. Still, a recalibration of strategies will be necessary to compete and succeed in this new reality. As global HQs and their China organizations align on how to do this, adapting the experience and know-how acquired in other geographies that have gone through periods of economic stress can help hone key operating competences.
Rallying around New Productive Forces. This “new” concept refers to the technologies necessary for China’s innovation-led growth and industrial upgrading and underscores China’s ambitions: industrial growth driven by innovation and technological advances that will not only support self-sufficiency and national security goals, but also create global competitiveness in strategic areas.
- Navigating the fallout from geopolitical and trade issues will remain a challenge for MNCs. Looking ahead, China will likely continue to focus on export-related diplomacy, but will push back hard against any (real or perceived) moves by other governments to further restrict exports in strategically important industries. This increases the risk that MNCs may land in the crossfire of geopolitical developments, and government policies and regulations.
Dipping into the old consumption toolkit. Boosting domestic consumption remains a key focus, but new ideas on how to do so are not forthcoming. The suggested measures may raise consumption at the margins, but are unlikely to have a substantial or lasting effect, without healthy growth in income and employment. For most MNCs, the lack of meaningful reform means that, at least for now, little is
likely to change immediately in the operating environment.
- Attention must now shift to the Third Plenum, the long overdue (and thus far not scheduled) third plenary session of the Central Committee of the Communist Party of China (CPC), which has traditionally outlined major economic reforms. This is where more substantial plans to unlock domestic consumption and provide MNCs with potential growth avenues are likely to be announced.
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