From 4 to 11 March, China’s National People’s Congress (NPC) was held in Beijing, also called the ‘Two Sessions’. The year 2024 is a crucial year for China in trying to achieve the objectives and tasks set out in the 14th Five-Year Plan (2021-2025), both in China as well as globally. In this article, we will summarize the most important takeaways for companies active in the Sino-Belgian business community. Additionally, on 19 March, China’s State Council announced new measures aimed at promoting foreign investment.
5% growth for 2024 is more challenging than 5% growth in 2023
Despite a lot of economic and geopolitical challenges, China’s GDP continued to grow over the past years, albeit with a lot of volatility. For 2024, China is targeting a growth rate of approximately 5%, similar to the 5,2% growth rate of 2023. Although this anticipated growth rate is similar to 2023, simple mathematics tell us that it will be more challenging to reach that target in 2024. The growth rate in 2023 was based on a moderate growth of only 3% in 2022, amidst the zero-Covid policy and impactful lockdowns. This year, the anticipated 5% is based on the economic situation of 2023. Hence, it will be more challenging to reach this 5% target than in was in 2023. A lot of work is to be done in 2024, both on the demand- and the supply-sides of the economy, both domestically and abroad.
A new growth model is required.
Since China began opening up and reforming its economy in 1978, GDP growth has averaged over 9% a year, with a peak of 14% in 2007 and transforming the nation into an upper-middle-income country. In the period 2012-2019, facing structural constraints including declining labor force growth, diminishing returns to investment, and slowing productivity advancement, GDP growth slowed down to 6-7% per year. After a disruptive pandemic period in 2020-2023, in the next 5 years IMF is expecting growth rates between 3-5%. The challenge going forward is to find new drivers of growth while addressing the social and environmental legacies of China’s previous development path.
China’s high growth based on investment, low-cost manufacturing and exports has largely reached its limits and has led to economic, social, and environmental imbalances. Reducing these imbalances requires shifts in the structure of the economy from manufacturing to high value services, from investment to consumption, and from high to low carbon intensity.
Focus on long-term sustainable growth.
Another important difference from the past is the quality of China’s growth. China’s growth model must adapt to new realities with structural adjustments and higher efficiency. This means that additional priority will be given to technological innovation, increased productivity and modernizing traditional sectors. Key words here are ‘high-tech’, ‘high efficiency’ and ‘high quality’. Additionally, bureaucracy should be reduced, and creativity enhanced. Everything now is about stability and slower, but more long-term sustainable growth. Growing for the sake of growing, at any cost, is no longer the ambition.
This new policy of ‘new quality productive forces’ can be seen as the successor of the ‘Made in China 2025’ strategy. Released in 2015, Made in China 2025 was China’s ten-year plan to upgrade China’s manufacturing base by rapidly developing high-tech industries. This policy was grossly underestimated by many western companies and governments and lead to the successful dominance of China in electric cars, green tech industries and other high-end industries. Now China plans to extend this ambitious policy to new focus industries such as infotech, biotech, artificial intelligence (AI), quantum computing, new energy and new materials, and so on.
China’s continuing economic challenges
Obviously, the Chinese government cannot ignore global economic challenges, such as global economic instability, regional conflicts, and logistical disruptions. In China, post-Covid-19 recovery lacks a solid foundation with weak demand, sectoral overcapacity, and various hidden risks. Small and medium-sized enterprises struggle, and both temporary and structural employment issues persist. The Chinese government pledged to address these issues rigorously in 2024, emphasizing goals such as wage growth, stable exchange rates, reduced energy consumption, and environmental protection.
Attract more foreign investment
China also plans to enhance national treatment for foreign-invested enterprises and continue to reduce market access restrictions for foreign investors. On 19 March, China’s State Council published a catalogue of 24 new measures aimed at promoting foreign investment. The plan, the latest in a series of efforts to boost foreign capital in China, proposes measures to improve the business environment, ease administrative burdens, expand market access in key industries, and create a playing field for foreign and domestic companies.
One of the main measures in the action plan is to expand market access for foreign companies by reducing the negative list and expanding the catalogue of encouraged industries for foreign investment. These catalogues list the industries and sectors that foreign investors are prohibited from or encouraged to participate in. The plan calls for carrying out pilot projects to relax foreign investment access in the field of scientific and technological innovation. A series of measures will also be implemented to improve cross-border collaboration between Chinese and foreign companies. One of the most significant measures is supporting data flows between foreign-invested affiliates in China and their overseas headquarters.
Another measure talks about the topic of fair competition between foreign-invested and domestic companies. Some foreign-invested companies had reported discriminatory behavior in areas such as government procurement and bidding, qualification licensing, standard setting, and subsidy enjoyment. The action plan calls for rectification of these issues.
From 14 March onwards, ordinary Belgian passport holders can enter China without a visa if they come to China for business, tourism, visiting relatives and friends, and transit for no more than 15 days. China’s recent relaxation in renewing visas and residence permits for foreign individuals and their families is another example. And finally, On March 14, Hainan Airlines announced they plan to restart direct flights from Brussels to Shanghai (Pudong) on June 18. Marking its third route from Belgium to China and doubling daily flights between the two countries, the airline aims to operate four weekly flights on Mondays, Tuesdays, Thursdays, and Saturdays, with convenient schedules for travellers.
Please contact the Belgian-Chinese Chamber of Commerce (BCECC) in case you need more information.