‘Two Sessions’ Fuel China’s Growth Momentum

China’s 2024 “two sessions,” taking place at a crucial point in the country’s economic recovery, are expected to provide insights into the nation’s economic direction for the coming year. Assessments by the World Bank and the International Monetary Fund show that the Chinese economy performed better than expected in the last months of 2023, though challenges remain.

The government work report has set a growth target of around 5% for 2024. Although trade remains a critical component of China’s GDP, there is an increased focus on boosting consumption. This shift reflects the Chinese government’s effort to adjust the economy’s growth model and persist in supply-side reforms. Adopting this approach is seen as a way to effectively achieve sustainable development goals in the medium to long term.

China is in the process of becoming a leader in innovation and technology. The quality of manufactured products can increase consumers’ desire to spend and purchase. Electric vehicles are a significant example. In 2023, Chinese automaker BYD became the global champion in new energy vehicle sales and retained its position as the Chinese market’s best-selling car brand and manufacturer.

Innovation and technology require investments in research, development and infrastructure. The Chinese government continues to invest in this direction. The work report highlights an anticipated government investment of 700 billion yuan ($97 billion) in 2024. Additionally, special national and local bonds will be issued to finance well-prepared projects where investments are more effective. China’s 14th Five-Year Plan (2021-25) for National Economic and Social Development has already outlined sectors of particular interest.

The empowerment of supply is certainly significant. However, supply alone, despite its quality, cannot necessarily stimulate domestic consumption. Incentives must be provided to encourage citizens to spend. The Chinese government has announced various measures to boost consumption, and this year’s “two sessions” may lead to the announcement of new policies for 2024.

Obviously, the purchasing power of citizens matters. The government report includes a reference to the planned creation of over 12 million urban jobs in 2024, a goal similar to that achieved in 2023. Reuters reported in January that 12.44 million urban job positions were created last year in the country. In conjunction with this, salaries play a critical role. When the national economy performs well, both state-owned and private companies can afford to increase wages modestly. The surge in domestic travel during the 2024 Spring Festival holidays can be seen as an initial sign of the Chinese people’s willingness to spend more.

The opening-up and reform process remains the cornerstone of China’s economic policy. One of the most noteworthy parts of the government report was the mention of removing market access restrictions for foreign investments in manufacturing and services such as telecommunications and healthcare. These measures send a clear signal of China’s firm commitment to further opening up. While more details are expected to be shared, there is a sense of long-term optimism.

Policy support and structural reforms are instrumental to securing China’s growth momentum, and the “two sessions” are framed within this context.