SITUATION UPDATE 15 March, 2021 Back
Situation Update - China's National People's Congress
- The annual legislative session was held from 5-11 March 2021 in Beijing.
- This year’s gathering was considered momentous as it marks the 100 year anniversary of the founding of the People’s Republic of China.
- Approximately 3,000 members met to vote on important pieces of legislation. Any major policy discussions have been deliberated and decided upon prior to the session, garnering nearly unanimous support.
- A significant focus for this session was implementing electoral reforms in the Hong Kong Special Administrative Region following the protests of 2019-2020.
- Economically, China is focused on a policy of “Dual Circulation” to increase domestic consumer spending and improve self-reliance and research in the technology sector.
- Premier Li Keqiang announced a Gross Domestic Product (GDP) growth target of over six percent for 2021.
- The defence budget was raised by seven percent in response to escalating tensions with Taiwan and disputes in the South China Sea.
China’s chief legislative body, the National People’s Congress (NPC), held its annual session from 5-11 March 2021 in Beijing. The gathering, which is also referred to as the Two Sessions, is considered the single most important legislative event in China as it sets the political priorities for the coming five years. The legislative gathering—with over 3,000 appointees—is largely ceremonial in function as the Chinese Communist Party ensures that any major policy decisions are thoroughly discussed and the outcome determined before legislation reaches the floor.
Due to the ongoing worldwide coronavirus (COVID-19) pandemic, many protective measures implemented during last year’s session remained in place, such as limiting event registration to journalists based in Beijing and holding several of the events virtually. Historically, the NPC is one of the few events where Chinese leaders have held press conferences with foreign reporters and journalists, offering a rare opportunity for ad hoc exchanges.
There were several important policies on the agenda for the 2021 NPC, with the most significant being a complete overhaul of electoral processes for the Hong Kong Special Administrative Region. The Congress overwhelmingly passed the resolution, with one abstention and 2,985 delegates in favour of electoral reforms for Hong Kong less than a year after the passage of the controversial National Security Law in June 2020. NPC Standing Committee Vice Chairman Wang Chen announced that reforms are necessary to ensure that Hong Kong is firmly under the control of “patriots.” Those considered patriots by the Chinese Communist Party usually come from Hong Kong’s elite and are in favour of a pro-Beijing administration in the SAR.
Once codified into law, the reforms will establish a vetting committee to review and confirm the qualifications of Hong Kong Legislative Council candidates. This new vetting process will side-line democratic candidates in favour of members that are more amenable to the Chinese Communist Party agenda, essentially nullifying the “One Country, Two Systems” policy. Currently, Hong Kong’s Legislative Council consists of 70 seats, with half of these seats filled by direct votes from the public; pro-democracy groups have made gains in this section. The other half is filled by groups and special interests that are historically pro-Beijing. Under the new law, seats will increase to 90 and sources state that the election vetting committee will directly appoint a large proportion of the Council. At the district level, local councillors will now be required to pledge loyalty to the Mainland, further dissuading pro-democracy candidates from working in local government.
The stated purpose of the reforms is to rid the electoral process of loopholes that allow anti-China and radical localists in Hong Kong to manipulate the system towards secessionist notions. Chinese leadership has indicated that Beijing will resolutely guard against any external or foreign intervention in Hong Kong’s affairs.
Approving the 14th Five Year Plan for National Economic and Social Development was another core agenda item of the NPC. This initiative will guide China’s efforts towards increasing self-reliance and innovation-led growth. Chinese Premier Li Keqiang announced during the opening session of the NPC that China has set a Gross Domestic Product (GDP) growth target of over six percent for 2021. As the only major economy to report growth in 2020 during the COVID-19 pandemic (2.3 percent), the 2021 growth projection is considered low by economists and the International Monetary Fund. However, the NPC did not release a target GDP for the full 2021-2025 period.
Li indicated that China is looking to the domestic economy for growth and is planning to create 11 million new urban jobs by strengthening innovation and technology development. The hallmark of the Five Year Plan is utilising technology as the driving force behind the “Dual Circulation” strategy. Dual circulation is intended to boost Chinese domestic consumption while reducing reliance on overseas markets and imported technology for long-term advancement. This feedback loop is expected to fuel the economy and reduce dependency on foreign capital. To reach this goal, Premier Li said China is planning to invest heavily in core technologies such as semi-conductors and chips, while continuing to fund advanced technologies such as 5G and artificial intelligence.
In a work report, the Finance Ministry informed the NPC that the national defence budget would be increased by approximately 6.8 percent. Premier Li confirmed that China would “boost military training and preparedness” and improve defence-related technology. The increase in defence spending is in step with the country’s economic growth and perceived security demands, including disputes in the South China Sea and East China Sea and intermittent skirmishes along the India-China border.
The recent tensions with Taiwan were addressed during the Two Sessions as well. The central government indicated that China would “resolutely deter” any secessionist activity or rhetoric from the island. During a news conference on Sunday, Foreign Minister Wang Yi urged the Biden administration to rescind the United States show of support for Taiwan, stating “the Chinese government has no room for compromise.”
The majority of decisions made by the 2021 National People’s Congress will not take effect immediately, with economic initiatives and job creation in particular occurring over a longer period. In contrast, the backlash regarding the resolution to overhaul the electoral system of Hong Kong began immediately. Many nations and pro-democracy organizations have already criticised Beijing for the legislation, with the United States indicating that its government will follow through on sanctions against those responsible for repressive acts in Hong Kong.
In the near term, the possibility of protests in Hong Kong against the reforms cannot be ruled out. In the past, demonstrations against the authority of Beijing has led to unrest. Unapproved demonstrations are forbidden by the national security law, so it is unclear whether sizable protests by pro-democracy groups will materialise. The law targets crimes of secession, subversion, terrorism, and collusion with foreign forces, with penalties as severe as life in prison, causing many independence/pro-democracy groups to disband. It is likely that the national security agency in Hong Kong—backed by Beijing—would strictly enforce the law to respond to protests against the election reform.
From an economic and trade standpoint, the dual circulation strategy of self-reliance will also lessen the effects of international “de-coupling,” from China as many international economies are re-evaluating their engagement and trade relationships with the nation. By creating a domestic supply chain for technology, sanctions like those issued by the United States will be less impactful upon Chinese development.