With China feeling the lick of a global economy in crisis, this year’s session of the National People’s Congress (NPC) had a different tone to those of recent years. For a start, the event was shortened to nine days in order to cut costs.
This frugal approach was no doubt intended to send the appropriate message to a public that has seen a normally sprightly economy begin to falter. And while Premier Wen Jiabao warned of challenges ahead, he had another, stronger message for the people: China will achieve its goal of 8% GDP growth this year.
The government is putting its faith in domestic consumption and investment to deliver economic stability. It will be a year of aggressive government spending as Beijing prepares to pick up the slack created by the slowdown in private sector activity. The national deficit will rise to US$139 billion (3% of GDP), US$110 billion of this coming from central government coffers. Local authorities will cover the remainder, issuing bonds to raise the money.
Together with increased bank lending – the target for 2009 is US$731 billion – these funds should cover the bulk of the US$586 billion stimulus package announced last year. What Wen didn’t do was give more information on how this stimulus money would be spent. The sense of disappointment was heightened, as many had expected Wen to come to the stage armed not only with details of the existing stimulus package, but also news of a fresh set of spending plans to boost the economy.
Instead Wen – who participated in a press conference at the end of the NPC as well as presenting his work report at the beginning – relied on broad brushstrokes to illustrate his plans, as is often the way with these events.
Interspersed with sound bites on Taiwan (Beijing is ready for peace talks) and the US (Wen fears for the safety of the US$1 trillion Beijing has in US government-backed securities), were further indications of policies targeting domestic economic health. These include: value-added tax reforms, a 17.6% increase in social security spending to US$42.9 billion, US$6.3 billion on low-rent housing, wage hikes for teachers, bigger handouts for farmers, and extra cash to ensure stability in central and western China.
There is no shortage of data to keep the government focused on staving off the threat of social unrest. Wage defaults in the southern city of Shenzhen topped US$4.39 million in the last quarter of 2008 and approximately 10% of migrant farmers have lost their factory jobs. Up to 80% of those farmers are still seeking employment, but it is unknown whether they will find it.
Meanwhile, the All-China Federation of Trade Unions (ACFTU) said it would offer training or living assistance to 10 million migrant workers. But it may not be enough – 20 million migrant workers were out of work in Guangdong province alone. The ACFTU said that the country needs to be on guard for elements that may try to stir up unrest among the newly unemployed.