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Chinese national flags flutter near Tian'anmen Square ahead of China's annual sessions of its top legislature and political advisory body, known as the "Two Sessions," on March 3, 2025, in Beijing.
Viewpoint: China’s annual NPC meeting to address lackluster economy and Trump threat
A sluggish economy and new headwinds created by Donald Trump’s return to the White House will be prominent themes when the nearly 3,000 delegates of China’s National People’s Congress, or NPC, convene in Beijing starting Wednesday. The legislative session will run for about seven days (time not fixed) in parallel with that of the National Committee of the Chinese People’s Political Consultative Conference, or CPPCC. The so-called Two Sessions represent China’s biggest annual political gathering and provide insight into the leadership’s priorities for the year ahead.
We asked Eurasia Group expert Lauren Gloudeman what to watch out for.
What are the NPC and CPPCC?
The NPC is China’s highest governmental organ and national legislature. It usually convenes just once a year to advance legislation and approve national policy plans; the smaller Standing Committee of the National People’s Congress meets more often to continue the body’s legislative work. The CPPCC unites about 2,000 representatives of different social and political groups, giving them the opportunity to make their views known to the country’s leadership. Its role is more symbolic than anything else.
How does the NPC fit into China’s broader governance framework?
On the one hand, you have organs of government such as the NPC and the State Council, which implements legislation passed by the NPC and supervises the bureaucracy. On the other hand, you have the Chinese Communist Party, with its decision-making bodies such as Politburo and the Central Committee. The relationship between the government and the party has changed over time. Xi Jinping – general secretary of the party and president of the Chinese state – has made it a priority to assert the party’s authority over the government. Li Qiang, the party’s No. 2 official is premier of the State Council; Zhao Leji, the party’s No. 3 official, heads the NPC.
Are the Two Sessions’ proceedings open to the public?
The first couple of days will be open-door sessions of public speeches, reports, and press conferences. Li will present his so-called government work report. Like the US president’s state-of-the-union speech, the work report reviews the achievements of the past year and identifies key tasks ahead for the government. It usually sets economic targets. In addition, Xi will give remarks and the Ministry of Finance will give a budget report. Then there will be several days of closed-door sessions, during which not much information will emerge. At the end, different ministries will follow up with press conferences about their plans to advance policies discussed at the NPC.
What do you expect will be the main topics of discussion?
One major topic will be what to do about weak consumer spending, which has been a challenge for years now – especially since the COVID-19 lockdowns, when some people couldn’t leave their homes for months. Nonetheless, we’re not expecting a sea change in the policy approach to stimulating spending. More likely is an expansion of existing trade-in programs that offer subsidies for consumers to trade in their old EVs, household appliances, and other consumer goods for new ones.
What else would you highlight?
On a related note, officials will discuss measures to promote private enterprises. One of the reasons consumer spending is weak is that so many businesses struggled during the pandemic and continue to struggle, which has affected hiring. Authorities aggravated these problems in the private sector with an aggressive regulatory campaign against major companies they thought were insufficiently aligned with the party’s national development strategy. Now they are trying to repair the damage. Xi met last week with the leaders of 20 or 30 companies to reassure them that the government cares about stabilizing the private sector, and the NPC is expected to discuss a so-called private economy law. This measure could, for example, codify into law that private companies have equal rights and status with state-owned companies and offer guarantees of payment for private companies doing business with local governments.
How do you expect tensions with the Trump administration – which has slapped new tariffs on China and threatened more – to play into the NPC discussions?
The NPC is not an event that reacts to or is calibrated around recent events. That said, since Trump took office, we’ve been seeing the party’s high-level talking points acknowledging “external uncertainty” – which is code for Trump-related risks. Its response has been to make it clear to the country that it is committed to increasing support for the domestic economy to boost confidence. I expect these themes to be prominent at the Two Sessions.
Edited by Jonathan House, senior editor at Eurasia Group.
China breaks out its biggest economic band-aid yet
The People’s Bank of China announced a raft of measures on Tuesday aimed at boosting the flagging economy as the country seems likely to miss its 5% GDP growth target for 2024.
What’s the plan?
- Cut the amount of cash banks need to keep on hand by half a percentage point to inject 1 trillion yuan ($142 billion) into the economy.
- Cut the interest rate on seven-day reverse repurchase loans from 1.7% to 1.5% to goose spending.
- Make it easier for banks to lend to corporations trying to repurchase their own shares.
- Cut interest rates on existing mortgages by half a percentage point.
- Cut required down payments for mortgages on second homes to 15% instead of 25%.
- Allow some banks to pay less interest on deposits to encourage consumer spending
- Signal more support could be coming.
Will it work? It should get China through 2024, but even though it’s the biggest move Beijing has made to stabilize its grumbling economy, it’s not a panacea.
First, it’s unclear that businesses are ready to borrow, even at advantageous interest rates, meaning that liquidity won’t necessarily get used. It also doesn’t address the structural problems of China’s property market, where many developers have defaulted. It includes little incentive for ordinary consumers to go out and spend, and the lack of demand is dragging on China’s growth.
We’re watching how this round of buoying plays out, and whether a bigger stimulus is on the horizon in 2025.
Chinese Premier Li Qiang bows after delivering the work report at the opening session of the National People's Congress (NPC) at the Great Hall of the People in Beijing, China March 5, 2024.
The truth behind China’s growth facade
Chinese Premier Li Qiang announced on Tuesday at the annual Two Sessions meeting that Beijing would seek to grow its economy by about 5% in 2024. China will also aim to create 12 million new urban jobs and keep inflation around 3%.
While it seems ambitious, Rick Waters, managing director for China at Eurasia Group, says Beijing will hit 5% – by hook or by crook.
“The bigger question is whether the Chinese economy will transition to sustainable drivers of lower but healthier growth,” he says. China is betting on high-tech industries, from renewable energy to electric vehicles, but these sectors will not easily replace the ailing property sector as a driver of growth or aid in the transition to a consumption-led growth model, even as Xi attempts to tighten control of both politics and the economy.
One side effect is that economic data is now becoming politically sensitive, with Beijing withholding youth unemployment numbers and censoring references to deflation.
Just this week, Beijing scrapped the annual tradition of holding a press conference with the premier at the Two Sessions – not just for 2024, but until 2027. That ends one of the only opportunities journalists had to question China’s head of government about the country’s highest-level budget and policy decisions.
“Canceling your quarterly earnings calls isn’t a formula to improve market perceptions. The reality is that market information on the world's second-biggest economy is worsening,” says Waters.
Aerial photo shows a residential area of Evergrande in Nanjing, East China's Jiangsu Province.
Evergrande’s last stand delayed
Embattled Chinese property developer Evergrande Group was meant to be in a Hong Kong court today, facing the once-unthinkable prospect of liquidation. The real estate colossus, which owns 1,300 projects in over 280 cities across China, has seen its shares plummet by 99% after the company defaulted on its $300 billion debt in 2021.
Since then, lawyers have come before bankruptcy judge Linda Chan seven times to attempt a restructuring, without success. She had indicated this was likely their last hurrah, but the developer was unexpectedly granted an adjournment on Monday to Jan. 29, 2024, giving it more time to finalize a revamped offshore debt-restructuring plan. If they fail, bankruptcy would have huge repercussions for shareholders, property owners, and the Chinese economy.
Shareholders: Unwinding Evergrande’s business structure could take years and provide little return for investors. The group has three companies listed on the Hong Kong Stock Exchange, including its holding company, as well as thousands of subsidiaries in China in a range of industries, such as electric vehicle manufacturing, life insurance, and sports entertainment.
Homeowners: Across China, an estimated 1.5 million Evergrande customers have been saddled with unfinished homes. In a country where real estate accounts for 80% of household wealth and 30% of the economy, the concern is that Evergrande is simply “too big to fail.” To staunch the bleeding, Beijing’s regulators have drafted a list of 50 developers eligible for financing support.
Financial institutions: Evergande’s troubles have produced a “contagion effect” from real estate development to real estate financing and a similar crackdown by authorities in that sector. Police are now investigating Zhongzhi Enterprise Group, a major shadow bank in China that lent billions of yuan to developers and is now insolvent with up to $64 billion in liabilities.
The headquarters of the People's Bank of China is pictured behind an iron chain in Beijing.
Will China’s property woes get political?
As China’s financial troubles mount, analysts forecast stormy skies for its economy — and potentially, its politics.
Much of the turmoil centers on the country’s real estate sector, which has traditionally driven up to 25% of its economic growth. Last Friday, property development giant China Evergrande Group filed for bankruptcy in the US after two years of restructuring. The same day, Hong Kong’s Hang Seng Index announced that it would be dropping Country Garden Holdings, the country’s largest property developer, from its listing as of Sept. 4. Earlier this month, Country Garden missed a deadline to pay $22.5 million in loan interest and is described as “teetering on the edge of default.”
There have been several attempts to right the nation’s economic ship in recent days. China’s securities regulator announced a series of reforms to boost investment in its capital markets. Its Ministry of Public Security announced a relaxation of internal migration rules to combat urban labor shortages. And the People’s Bank of China attempted to shore up the renminbi by injecting Rmb757 billion ($104bn) of short-term liquidity into China’s banking system and cutting medium-term financing rates.
Household consumption — so low that there are fears of deflation — makes up only about 38% of GDP in China, compared with around 68% in the US, so increased consumer spending is an obvious choice for spurring economic growth. On Monday, the bank modestly cut one-year and five-year loan prime rates to make it easier for businesses and households to borrow money and boost consumer spending.
Why this matters: Apart from risks to both China’s and the world’s economy, there is concern that worsening economic prospects could incite the Chinese government to ramp up repression at home and aggression aboard. Former Special Assistant to the US Secretary of Defense Hal Brands warned that "China may act more aggressively in the near term — as its military capabilities mature — to lock in gains while it still has the chance." And President Joe Biden opined earlier this month that China’s economic woes present a “ticking time bomb” which could lead its leadership to “do bad things.”
Topping that list? Military action against Taiwan. China’s latest show of force in the region saw 42 warplanes and eight vessels dispatched to the South China Sea after Taiwanese Vice President William Lai stopped over in the United States en route to Paraguay.
Such a demonstration may be as much for domestic as external consumption to assert Xi Jinping’s authority and quell the grumbling of Chinese citizens, some of whom are angrily asserting their rights as their property investments tank. A whopping 90% of China’s households are homeowners, and most household debt is in the form of mortgages. That debt hit 63.5% of GDP in the second quarter of 2023, so if the country has its own Lehman Brothers moment, it could make the 2008-09 financial crisis look quaint by comparison.A motorist rides past a hoarding decorated with flowers to welcome G20 foreign ministers in New Delhi, India, March 1, 2023.
What We’re Watching: Tense G-20 talks in India, Finland’s fence-building, China’s economic activity, Chicago’s mayoral runoff
An awkward G-20 summit in Delhi
When G-20 foreign ministers met in New Delhi on Thursday, it was, as expected, an awkward affair. While India, the current G-20 chair, had hoped that the bloc would focus on issues of importance to the Global South, like climate change and the global food crisis, the agenda was disrupted by US-Russia bickering over the war in Ukraine, which US Secretary of State Antony Blinken called "unprovoked and unjustified war", while Russian Foreign Minister Sergei Lavrov blamed the West for not doing enough to extend a deal to allow Ukrainian grain exports that will soon expire. Of course, focusing on anything else was going to be a tall order when the top diplomats of the US, China, and Russia were all in the same room. (President Biden and Xi Jinping last met at the G-20 summit in Bali in November, though there was no bilateral meeting between the US and Russia.) In a sign of how fractured Washington's relationship remains with these two states, Blinken on Wednesday again urged Beijing not to send lethal weapons to Russia and canned China’s peace plan for Ukraine. As for US-Russia relations … need we say more? India, which has gone to painstaking lengths to maintain its neutral status over the past year, says it thinks the group can get stuff done. But at a meeting last month of G-20 financial heads, the group couldn’t even agree on a joint statement.
Finland builds a border fence against Russia
Rakentaa se aita! That's Finnish for "Build that fence!" — which is what Finland plans to do to protect its borders from Russian draft dodgers. Construction of a 10-foot tall wall, ahem, fence began this week along Finland's 800-mile border with Russia, with the first section expected to be finished by June. The Finns want to stop Russians from entering after fleeing the draft to fight in Ukraine, a number that could rise if Vladimir Putin orders another mobilization in the coming months. Meanwhile, Finland's parliament on Wednesday overwhelmingly approved the government's plan to speed up the process to join NATO — ideally along with Sweden, a fellow Nordic, if Turkey ever backs off. Going back to the fence, parts of it will have all the bells and whistles — night-vision cameras, lights, and loudspeakers — that former US President Donald Trump could only dream of for his partially built "Big, beautiful wall." And like Mexico, you can bet that Russia won't pay for it.
Chinese economic activity rebounds
China's official manufacturing sector purchasing managers’ index — a closely watched indicator of economic activity — reached 52.6% in February, expanding at its fastest monthly pace in over a decade. What's more, home sales rose for the first time in two years amid a persistent property-sector slump. The good: The two figures beat expectations and are a clear sign that the world's second-largest economy is recovering quicker than expected after abruptly ditching zero-COVID. The bad: The starting point was very low, as China's GDP grew last year by only 3%, barely half of what the ruling Communist Party had targeted. The ugly: While this is excellent news for Xi Jinping and a global economy that's eager for both more Chinese demand for stuff and more Chinese capacity to make stuff, economic activity has yet to reach pre-pandemic levels. Also, China's economy is still facing strong pressure from the fallout of the US-China rivalry, with American companies feeling increasingly bearish about the future as ties between Beijing and Washington get icier.
Chicago election result portends impending showdown over policing
Voters in Chicago denied Lori Lightfoot, who made history as the city’s first openly gay and Black female mayor, a second term amid concerns over rising crime, which increased by 41% between 2021 and 2022. Lightfoot, who cruised to office in 2019 on an anti-corruption platform, had been widely criticized for the high crime rate in America’s third-largest city. No candidate in the Democratic stronghold clinched over 50% of the vote needed to win outright this week, so the two remaining candidates – both Dems – will go to an April 4th runoff, with the controversial issue of policing underscoring the stark divide between them. On one side is Paul Vallas, who has drawn criticism for past comments and for associating with the Windy City’s controversial police union leader. He promises to add hundreds of officers back to the police force if elected. His challenger, Brian Johnson, favors investment in services like housing, education, and mental health over more policing. Amid rising post-pandemic crime in major US cities, political differences over investment in public safety measures will play an increasingly central role in US mayoral elections. We’ll be watching as Philadelphia and Houston head to the polls later this year.
US-Iran World Cup sportsmanship amid political tensions
Ian Bremmer shares his insights on global politics this week on World In :60.
How did Iran's attention in the World Cup impact protests at home?
Well, I mean, it certainly didn't slow them down any. When you see the Iranian national team first refusing to sing the national anthem and then singing it as woodenly and non-passionately as humanly possible because they've been threatened, and threatened about their families at home if they aren't singing it, that's a hell of a message to send to the Iranian people. And the fact that this country does not reflect its regime, a team does not reflect its regime, it's just extraordinary. And also, I just have to say that all of the pictures and the videos we've seen of the Iranian team and the American team actually coming together, the Americans consoling the Iranians, who have been under such massive stress and crying, and I mean, you can't even imagine performing at that level on the global stage, given the level of additional political pressure and danger that they're actually under. My heart goes out to those guys, and of course to the Americans for doing such a great job representing our country.
Will protests force Xi Jinping to finally abandon China's zero COVID policy?
No, not at all. First of all, those protests are largely already in the rear-view mirror. I do not expect we will see a reprise of them at that size in the near future. Certainly not with people calling for Xi's removal. Big consequences for that going forward. And I think a lot of people understand that. But this also means big consequences for the Chinese economy. And ultimately, difference in somewhat looser interpretation of implementation is very different from, we're stepping away from zero COVID. They're not ready to do that yet. They won't do it yet. And so Chinese growth is still going to be very slow. China's social anger at these policies is still going to be something difficult they're going to have to deal with.
Why is Mexico and the US fighting over corn?
Well, apparently it's because Lopez Obrador is not willing to allow GMO corn from the United States to come in. Now, half of Mexico's corn apparently comes from the United States, and this would be a really big challenge, both for the relationship as well as for Mexican food demand. The Trump administration tried to push AMLO on it, kind of failed. Biden administration pushing AMLO on it, kind of fails. So as a consequence, it's likely to be going towards USMCA, the Mexico Canada deal, into arbitration. And nobody likes to see that, but that's where we are.
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COVID protests spread in China
Ian Bremmer's Quick Take: My goodness, speaking of kicking off your week, all across China, demonstrations of the sort that we have certainly not seen under Xi Jinping rule about COVID, about zero COVID, and the loss of liberties that Chinese citizens have faced, but also increasingly moving towards demands for free speech and open media, and even Xi Jinping's removal, certainly unprecedented in this country in the last decade. Xi now, of course, on his third term, having removed term limits, consolidated extraordinary power, but some people really aren't happy about it.
What's going on here? Well, first of all, the proximate cause, the spark that set this all off was an apartment building fire in Xinjiang, where the firefighters were not able to adequately respond because of COVID quarantine measures. So, they couldn't get hoses to actually fight the fire because they weren't allowed in, they didn't have the keys, it was locked down. And as a consequence, a lot of Chinese citizens died. That led to demonstrations all over the country, ostensibly in solidarity with this incredibly poor mistake on the part of local Chinese leaders in Xinjiang, but also really increasingly frustrated with the fact that zero COVID in China has been an incredible disruption to daily life for hundreds of millions of Chinese.
You get one case and suddenly you can lock down your entire apartment block. You were in contact with somebody who was in contact with someone that was positive and so much for your ability to get into a workplace or a restaurant. And these apps which monitor your every move, and unless you're green, you are not going anywhere as a Chinese citizen. And they're testing you across the country every two days. And they're watching while the rest of the world and the World Cup, for example, is all out and they're celebrating and they're in post-COVID life. And that's not the case in China at all.
Very interesting to see that the classes of people that are angry here are across the map. You've got students in universities across the country. You've got workers in factories that have been locked down, that are stuck in the dormitories or stuck in their places of work for weeks on end. You've got members of the middle-class in shopping malls in higher end locations. The urban intelligentsia in Shanghai, which led to some of the first significant outcry after their quarantines and lockdowns were fairly badly handled. And of course, as the wealthiest city in China, very educated city in China, the feeling was, well, how can our government get this wrong? We're the ones that are supposed to do everything right. Well, not at all.
Now, it's important to recognize that we're not talking about scenes that are violent. There have been a number of arrests, but nothing like significant repression on the part of the Chinese police forces or army so far, which means that the Chinese government is allowing this to play out at least over the course of the weekend. And I do expect that some of the response from the Chinese government will be an admission that zero COVID measures have not been effectively rolled out across the entire country that have not been equivalently rolled out across the entire country. By the way, that is true. And a number of local and regional officials will be forced to fall on their sword will be removed, some will be arrested, corruption, incompetence, I mean, we've certainly seen that movie before in China. And there's a lot that Xi Jinping can do in response to that as well as cracking down to a harder degree at the same time that would take a lot of these people off the streets.
So this is not a threat to Xi Jinping's regime or his rule. And if we look back to 1989, in the months leading up to the Tiananmen Square massacre, demonstrations and massacre, you would've seen millions of people demonstrating across the country in cities everywhere. That is nothing remotely like what we're seeing right now.
But the key point here is that Xi Jinping's ability to respond to changing zero COVID is limited. There are record numbers of cases in China, nothing like what we see in the United States, but far greater than China has seen since the beginning of COVID outbreaks a couple of years ago. And a lot of Chinese are not vaccinated, and those that are, most of them were vaccinated a couple of years ago. Particularly when we look at older populations that are very vulnerable. China's own vaccines have been very limited in efficacy, less so than mRNA vaccines in the West. They're not willing to approve mRNA vaccines from the West. And while they have gone faster with approvals for therapeutics in response to COVID, they still don't have distribution taken care of on the ground in China. And so they don't have the widespread therapeutics that exist in the West either. So they're still at a minimum months away from meaningful reductions and relaxations of zero COVID policy in China. And that means that Xi Jinping's ability to truly address the anger that we're seeing on the streets is going to be mostly about stick, it's not about carrot.
Now, of course, with the surveillance state that China presently runs, they have the capacity to do that in a way that really no other state at scale can. But that does imply more violence. It does imply more repression. It also implies, and this is critical, longer reduced economic growth, bigger disruptions in supply chain. It's very interesting right now, I saw oil prices are basically trading at the top of their pre-Russian invasion range. Why? Because of expectations that zero COVID is going to be a bigger economic problem for longer. I think that's absolutely right, that the Chinese are going to have to deal with lower quality and lower realities of growth through 2023 at an absolute minimum.
Another thing I'd mention is that during Xi Jinping's private bilaterals at the G-20 in Bali, just a week and a half ago, he wasn't bringing up zero COVID at all. It didn't show up in those conversations unless he was proactively asked about it. In part, maybe because at the time he didn't think it was a crisis, certainly wasn't planning on making any significant announcements anytime soon. I think that's where we are right now.
So they're stuck, they're in a corner. This isn't major instability, but it's absolutely bearing watching out and certainly will have a major impact on the global economy in 2023. That's it for me. Hope everyone's well, and I'll talk to y'all real soon.