Takeaways from Two Sessions in Beijing This Year

Government Work Report- Chinese Version of State of Union Address

Delegates of two central political bodies in China, the National People's Congress (NPC) and the Chinese People Political Consultative Conference (CPPCC), gather in the Great Hall of The People in Beijing in March every year to hear and review the Government Work Report presented by the Premier. This annual meeting is known as “Two Sessions” and is featured in many official news, press releases, and documents. The work report presented at the opening of the two sessions acted as the straw in the wind of the country’s outlook, showing the government's prioritization and road map for the year's economic and political plan. Stakeholders then use the content from the work report to develop their game plan and refine their tactics for the upcoming year.

At the opening of the two sessions on March 5, Premier Li Qian presented a report that underscored China's significant economic achievements. The country's GDP reached RMB134.9 trillion (USD 19 Trillion) in 2024, marking a 5% annual growth that met the previous year's target. Foreign exchange reserves surpassed $3.2 trillion, and disposable income per capita saw a 5.1% increase. China also added 12.56 million new urban jobs, with the Surveyed Urban Unemployment ratio at 5.1%, below the 5.5% target. However, the Consumer Price Index (CPI) only rose by +0.2%, falling short of the 3% target.

Premier Li's report also highlighted China's strides in key industrial sectors and sustainable development. The country's grain production output exceeded 840 million metric tons, and over 13 million Electric Vehicles were manufactured. Notably, high-tech manufacturing, equipment manufacturing, transmission software and IT services, and leasing and business services all saw robust annual growth in the high single digits or double digits. Furthermore, China's commitment to reducing energy consumption was evident, with a 3% decrease in energy consumption per unit of GDP, surpassing the 2.5% goal.

What is expected in 2025

For 2025, Premier Li is looking at "Around 5%” GDP growth and a 5.5.% target for Survey Urban Unemployment in 2025. For the Surveyed Urban Unemployment rate to be around 5.5%, over 12 million new urban jobs would need to be created. Maintaining around 840 million metric tons grain production and keeps 3% reduction energy consumption per unit of GDP.

To achieve these goals, the report mentioned that 10 key tasks were launched: 1) Boosting consumption, 2)Developing and upgrading industry; 3)Developing science and innovation, 4)Promote  implementation of landmark reform measures, 5)Expanding high-level opening up, 6)Prevent and resolve risks in key areas, 7)Promoting rural revitalization, 8)New urbanization and regional coordinated development, 9)Encouraging carbon reduction, pollution control, green expansion and growth and 10)Ensuring improving people’s livelihood while enhancing social governance efficiency.

According to the report, a deficit ratio of around 4% is expected in 2025 (1% higher than in 2024), which means a deficit of RMB 5.66 trillion ($776 billion). The General public budget expenditure will be set at RMB 29.7 trillion ($4.07 trillion), an increase of $164 billion from the previous year.

Over $800 Billion in Bonds Insurance in the Pipeline

To provide funds for the tasks and other expenditures, the government plans to issue 3 types of bonds in 2025:

Ultra-long-term special government bonds: RMB 1.3 trillion ($178 billion), 300 billion ($41 billion) higher than the same in 2024;Special government bonds: RMB 500 billion ($68 billion) to support replenishment for large state-owned commercial banks

Local government special-purpose bonds: 4.4 trillion ($603 billion), an increase of RMB 500 billion ($68 billion) from 2024.

With the above, RMB 11.86 trillion ($1.62 trillion) in Total new government debt is expected in 2025, RMB 2.9 trillion ($397 billion) higher than in 2024.

Looking for A Gadget to  Increase Public Spending

Achieving 5% GDP growth is the Work Report's primary economic mission as the country needs this growth rate to offset the new working force each year. The government intends to use the 10 key tasks proposed to drive the three objectives: Pumping Up Domestic Demand, Technological Innovation and Reform, and Opening Up. However, when planners make a promising outlook for the coming year, slow domestic consumption threatens the 5% GDP growth goal. In January 2025, the CPI was 0.5%; in February 2025, it was 0.7%. Despite the Chinese New Year already taking place, February CPI exceeded market expectations by 0.5%, causing demand to fade. Consumer deflation was recorded for the first time since January 2024, and the market is concerned that the deflation cycle is about to resume. In order to boost domestic consumption, the government launched a program of equipment renewals and trade-ins of consumer goods last year. A 20% monthly increase in home appliance sales was reported last year, and more than 6.5 million vehicles will either be scrapped or renewed by       2024. Consumer goods trade-in subsidies have expanded to 12 categories (from 8) in home appliances. Consumers who purchase a mobile phone, tablet, smart watch, etc., with a price tag not exceeding RMB 6000 ( $820) could receive 15% subsidies or RMB 500 ( $71) maximum subsidies. As a result of this stimulation, the market doubted the sustainability because individuals usually could only buy once in a specified period of time. To create confidence among civilians so that they can spend without hesitation, rather than keeping their money for rainy days, policymakers need to come up with more stimulus plans.

As the work report only outlines the direction of the central government, ministries and local governments need to better understand the central government's intentions. Implementation policies and plans will be released in a few weeks to facilitate the plan in the work report.