- The annual National People’s Congress is set to be delayed until at least the end of March or even early April due to the coronavirus outbreak
- The annual parliamentary gathering is a ceremonial event to rubber-stamp policies that have already been decided, but the outbreak has changed the landscape
The forced postponement of China's annual parliamentary gathering due to the coronavirus outbreak has added fresh uncertainty and complexity to Beijing's management of the world's second largest economy, reflecting inherent contradiction between a top-down policymaking system and a rapidly changing world.
Beijing's practice of setting targets and top-down approach, a legacy from the command economy days, is again under pressure with the National People's Congress set to be delayed until at least the end of March or even early April.
This raises questions over how China can reconcile goals made at December's Central Economic Work Conference, which are usually then released during Premier Li Keqiang's government work report at the National People's Congress, with the reality of a much-changed environment due to the deadly coronavirus outbreak which escalated at the end of January.
While the annual parliamentary gathering is seen as a ceremonial event to rubber-stamp policies that have already been decided, it is officially the supreme power body in China and the visible end of a long and opaque policy decision making chain.
It is the venue to explain the ruling Communist Party's decisions to the public and to publish Beijing's targets for economic growth, unemployment and inflation as well as the fiscal deficits " all of which were decided weeks or even months earlier at close-door meetings but remained unpublished.
President Xi Jinping has said on several different occasions over the last two weeks that China will stick to its economic and social development goals for 2020 as the impact of coronavirus, which has killed over 2,000 people in China and seriously disrupted services and production, would be short-lived.
In a telephone call with French President Emmanuel Macron on Tuesday, Xi reiterated the message that the impact of the coronavirus, which causes the disease officially known as Covid-19, on China's economy will be "temporary" and that China "will still be able to achieve this year's set goals for economic and social development", Xinhua reported.
While Xi is putting faith in the broad policy direction set at the Central Economic Work Conference in December and the grand vision of building up a comprehensive well-off society by 2020, analysts have said the Chinese authority should be flexible in adjusting its specific economic policies and goals in response to the outbreak.
A report published by a group of 17 senior officials and economists, led by former central bank deputy governor Wu Xiaoling, this week argued that China should increase the fiscal deficit to 3.5 per cent of gross domestic product (GDP) this year, breaking the red line of 3 per cent, to support the economy. In addition, China should also issue 1 trillion yuan (US$142 billion) of special treasury bonds to help growth.
The report even suggested that China's National Bureau of Statistics should publish a comparable GDP growth figure for the first quarter of 2020 by "excluding the impact of the coronavirus" in a bid to shore up public and market confidence, in addition to the usual headline GDP growth figure.
The 2020 GDP growth target is another widely watched figure to be released during the National People's Congress.
The closed-door Central Economic Work Conference discusses the target and decides the figure, which is in turn endorsed into the government work report through internal drafting.
The report is then read to the National People's Congress, which was scheduled to be on March 5 this year, and ultimately approved.
The figure is technically a confidential number until it is officially released, but in reality, it has already been briefed internally to senior officials.
It is widely reported that China's GDP growth target for 2020 will be set at "around 6 per cent" against the 2019 target of "6 to 6.5 per cent" and the actual 2019 growth rate of 6.1 per cent.
Zhang Yansheng, the chief research fellow at the Beijing-based think tank, the China Centre for International Economic Exchanges, said that China may revise its annual economic growth target for 2020 in response to the coronavirus outbreak.
There might be some policy fine-tuning, but the overall direction will remain unchangedShen Jianguang
"There will definitely be adjustments. For the central government, it hasn't defined what the 'reasonable range' should be after the outbreak of coronavirus. People are still watching how the outbreak will develop and influence the economy," Zhang said.
Shen Jianguang, chief economist of JD Digits, said that there remains many uncertainties as the outbreak continues.
"There might be some policy fine-tuning, but the overall direction will remain unchanged," he said.
Beijing finds itself in an awkward position, as if it keeps the long-agreed targets for GDP growth and fiscal deficit, it may look out of touch with the new reality since the first quarter of GDP growth, which is scheduled be released in middle of April, is set to be very low.
But if it revises the target, it could send a confusing messages since 29 out of 31 provincial-level governments have already published their local growth goals for the year with reference to the previous targets briefed by Beijing.
Song Xiaowu, former president of the China Society of Economic Reform, a state-backed think tank, argued that China should forgo the 6 per cent annual growth target and even the long-term goal of doubling the size of its economy in 2020 from 2010, a key part of the "comprehensive well-off society target.
Ding Shuang, chief Greater China economist of Standard Chartered Bank, said China may stick to the target of keeping growth at "around 6 per cent" for 2020 but that Beijing will "tolerate a bigger deviation from the target".
Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
