China’s Two Sessions: GDP Growth and Implications

Key Implications of GDP Growth Target in 2022

Despite China’s strong rebound in 2021 at 8.1% from 2020 at 2.35%, the target GDP growth for 2022 is set at a cautiously ambitious 5.5% as announced in China’s annual “Two Sessions” legislative meetings. In translation, this growth will encompass more than 11 million new urban jobs, a CPI increase of 3%, more than 650 million metric tons of grain output, 2.8% budget deficit-to-GDP ratio, and RMB 3.65 trillion domestic investment target.

These plans are critical to China’s economic and social developments in 2022, as the Communist Party leaders will subsequently pass major laws and regulations, and determine which key industries and businesses will be prioritized for resource allocation in both the public and private sectors.

Market Development Trends and Spotlights

Following recent years’ restrictions on real-estate development, which has been one of China’s top 3 staple factors contributing to continuous GDP growth, the central government is likely to shift its focus on a range of diverse topics for more viable and sustainable solutions.

• Real Estate & Property Development, together with its complex industry chain, has been enjoying a comprehensive ROI of 810%. Joint initiatives, including Anti-corruption Act and Common Prosperity, have been implemented to contain and stabilize this sector.
• An ideal alternative is the New Energy field, from electronic vehicles to green hydrogen and Thorium-based nuclear power plants, has achieved a comprehensive ROI of 570% and is expected to perform better in the immediate future.
• Technology and Innovation has seen promising growth due to substantial improvement in China’s domestic capability, as indicated by its RMB 2.79 trillion budget devoted to Research and Development and China’s Global Innovation Index’s 12^th ranking in 2021.
• Emerging military applications of new technologies will likely be considered as crucial next-generation warfare tactics. Aerospace and telecommunication industries are expected to benefit from China’s 2022 military budget at RMB 1.45 trillion, a 7.1% YoY increase.

Underlying Challenges for MNCs

While economic headwinds and supporting policies all point to fast-paced regulatory reforms to promote consumer confidence and economy stability, these indicators of future market conditions and China’s s embroidering economic, political, and military ambitions can imply very different signals to the international community.

• Stability does not equal Rapid Growth – opportunities will emerge in a narrower set of areas.
• Policy favors local domestic players – development policies continue to emphasize self-reliance in core sectors and technologies to foster domestic innovation for long-term growth.
• Continued disruptions – COVID countermeasures, supply chain challenges, and energy shortages are not likely to improve before the 20^th Party Congress late this year.
• Uncertainty and Increased Risks – business agility with continues to be a major hurdle amongst MNCs as response time can be prolonged by corporate red-tape.
• Other key themes include Geopolitical Impact, Rising Nationalism, Data Compliance, Talent Retention, Government Affairs, Localization, Crisis Protocol, and Reputational Issues.