What to Expect At China’s ‘Two Sessions’

• The "Two Sessions" refer to the annual meetings of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), typically held in March, serving as the primary venue for revealing China's planned social and economic targets.
• 2021 holds distinct political significance as the inaugural year of the 14th Five-Year Plan (2021–2025) and the beginning of the Communist Party's centennial celebration, driving the focus on long-term policy frameworks.
• Goldman Sachs expects the 2021 government work report to prioritize domestic demand, economic resilience, and sustainability over reliance on external markets, addressing domestic imbalances and shifting global dynamics.

Growth Targets and Economic Parameters

• There is a possibility that the government will not set a specific numeric GDP growth target for 2021, continuing the "new regime" established in 2020 to avoid the risk of overstimulation.
  • In 2020, the absence of a target was justified by President Xi Jinping to prevent the need for excessive policy support required to meet rigid goals.
  • Conversely, a return to a traditional numeric target or a very low benchmark (e.g., above 6%) remains a possibility, particularly as local governments have already set low targets to ensure surplus.
• Key economic parameters under scrutiny include specific targets for inflation and employment, with a shift in focus toward people's livelihood metrics.

14th Five-Year Plan Sectoral Focus

• The 14th Five-Year Plan identifies three primary strategic buckets: technology, consumption, and environment, underpinned by principles of resilience, productivity, and sustainability.
  • Technology: Emphasizes self-reliance in critical areas such as semiconductor production to improve long-term productivity and reduce external dependency.
  • Consumption: Aims to transition the economy from an investment-driven model to one fueled by domestic consumption to ensure sustainable growth.
  • Environment: Aligns with the national objective of achieving carbon neutrality by 2060 through climate change mitigation and cleaner environmental standards.
• Investors will monitor specific implementation parameters, including urbanization rates, R&D investment levels, and concrete measures to encourage consumption.

Monetary and Fiscal Policy Normalization

• Global attention focuses on the "exit strategy" for normalizing support measures after the 2020 COVID-19 shock, with the pace and combination of policies being the key variable.
• Fiscal policy details expected include the size of the fiscal deficit and the issuance volume of local government special bonds earmarked for infrastructure.
• Monetary policy guidance is anticipated to be more nuanced, requiring close reading of language regarding policy stance and management focus rather than hard numbers.
• Property market regulations will also be a critical signal regarding the government's outlook on 2021 growth and risk management.