Quote from Alex bobby on March 6, 2024, 4:45 AM

China’s plans for 2024 prioritize technology, offer scant comfort for businesses and investors

China's economic plan for 2024 is rich in aspirations and commitments, yet it stands out for its absence of specific measures to implement long-promised reforms eagerly anticipated by foreign businesses and investors. Premier Li Qiang presented the work report on Tuesday to the National People's Congress, emphasizing modest increases in overall spending and a substantial 7.2% boost in military funding.

The Communist Party's objective is a 5% economic growth this year, a target deemed challenging by economists. Li also highlighted the focus on supporting research and industries to achieve breakthroughs in critical technologies such as computer chips. These objectives align with President Xi Jinping's goal to bolster China's self-sufficiency and prowess in advanced technologies amid tensions with Washington over technology and national security issues.

While Li's report aims to showcase past achievements and outline leadership priorities, it falls short of addressing concerns prompting foreign businesses to reassess their investment strategies in China, according to James Zimmerman, a former head of the American Chamber of Commerce in Beijing. He notes a lack of reform, liberalization, action plans, and reassurance messaging.

The decision to cancel the premier's annual news conference further contributes to a sense of decreasing transparency, Zimmerman added. Economist Tianchen Xu echoes this sentiment, stating that the report largely reiterates previous government statements without substantial progress. Xu emphasizes the need for concrete steps like liberalizing telecommunications and healthcare investment and enacting laws to ensure private businesses can recover unpaid debts.

Chinese markets have recently stagnated, with Hong Kong's Hang Seng index dropping 2.6%, driven by heavy selling in technology stocks like Alibaba, Baidu, and JD.com. Despite expectations of a 5% GDP growth target, concerns arise over the lack of post-pandemic economic support, potential below-average global demand, and the challenge of maintaining growth in 2024, as highlighted by Lynn Song, chief economist for Greater China at ING Economics.

The work report includes several key points:

1. Encouraging consumers to replace old appliances and switch to electric vehicles to stimulate domestic demand.
2. A 10% increase in spending on research and development.
3. A 7.2% rise in military spending, reaching 1.67 trillion yuan ($232 billion).
4. Issuance of 1 trillion yuan ($139 billion) in ultra-long-term special bonds to support national strategies and enhance security in key industries.
5. Allocating 10.4 billion yuan ($1.4 billion) for upgrading industries and modernizing manufacturing.
6. Encouraging more venture capital and equity investment and using market-based measures to accelerate the development of computer chip manufacturing and advanced information technology.

The report also emphasizes building China's self-reliance and strength in science and technology and sets a goal of reducing energy consumption by 2.5% this year, moving toward carbon neutrality to address climate change. The report is expected to be endorsed by the congress at its conclusion next week.