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China economy
OpinionComment
Hao Zhou
Hao Zhou

The View | China’s ‘two sessions’: how Beijing is moving past GDP targets and towards social balance

  • While Premier Li Keqiang may still mention hard economic targets in his annual work report, the market needs to see that policy dynamics are shifting
  • To pursue its ‘dual circulation’ strategy in the coming years, China needs a bigger consumer base as it looks to reduce income inequality

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Chinese Premier Li Keqiang delivers his work report during the opening session of the National People’s Congress in Beijing on May 22, 2020. The policy dynamics are shifting this year in Beijing. Photo: AFP
Hao Zhou
At a grand event last week in the Great Hall of the People in Beijing, ahead of the annual National People’s Congress this week, Chinese President Xi Jinping declared a “complete victory” over absolute poverty. The state media reported that close to 100 million Chinese living in rural areas had been lifted out of absolute poverty since Xi came to power in late 2012.
When market investors watch the NPC, their focus is usually on the economic targets set by Beijing. From these so-called hard indicators, the investors would elaborate and draw some policy and market implications. From Chinese policymakers’ perspective, these economic targets act as a form of forward guidance and help to anchor market expectations.

However, both investors and policymakers have gradually realised that while the rigid economic targets provide clear guidance, many other issues may be overlooked, which could then be harmful to all of society.

For instance, economic growth has not benefited all segments of the population equally or at the same pace, resulting in a significant increase in income inequality. This is especially of concern as high levels of inequality affect the pace and sustainability of growth, particularly in the long term. 

The Gini coefficient is widely used to gauge income equality. For China, data suggests that the Gini coefficient started rising as far back as the early 1980s, reflecting an increase in income disparity.

04:59

Xi Jinping declares ‘complete victory’ in China’s anti-poverty campaign, but some still left behind

Xi Jinping declares ‘complete victory’ in China’s anti-poverty campaign, but some still left behind

In recent years, although China’s Gini coefficient has shown signs of levelling off – it stood at 0.465 in 2019, down from a peak of 0.491 in 2008 – the National Bureau of Statistics is still concerned that a number in the range of 0.4 to 0.5 reflects an income gap that is too large.

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