Li Qiang's Work Report & 2024 Budget Data
Hi folks,
In the continued coverage of the Two Sessions, today Li Qiang delivered his first Government Work Report. The big point to takeaway is that he set a GDP growth target of 5%. WSJ’s report on this says:
“Economists say growth of around 5% this year won’t be easy to accomplish, given the litany of challenges Beijing faces, including a protracted property slump, persistent deflationary pressures and tepid consumer demand, in addition to growing geopolitical tensions with the West. Trade frictions look set to intensify this year as China’s factories churn out more products than its domestic economy appears able to absorb, especially in electric vehicles and solar panels.”
Another key point is that budget deficit is set for 3% of GDP, down from a revised 3.8% last year. General public expenditures in the government budget are projected to reach 28.5 trillion yuan, an increase of 1.1 trillion yuan over last year. This year, 3.9 trillion yuan of special purpose bonds for local governments will be issued, an increase of 100 billion yuan over last year. In addition, 1 trillion yuan worth ultra long special treasury bonds be issued this year to implement major national strategies and build up security capacity in key areas.
On the real estate sector, Li signalled some urgency, calling to “move faster to foster a new development model for real estate.” But he did reiterated that the effort will be to meet the “justified financing demands of real estate enterprises”.
Before, I get to a breakdown of Li’s work report, I am sharing below a brief snapshot of the 2024 budget data.
Revenue in the central government’s general public budget is projected at 10.2425 trillion yuan, up 2.9% over the actual figure in 2023. But total revenue is expected to be 11.0657 trillion yuan.
Expenditures in the central general public budget are projected to be 14.4057 trillion yuan, an increase of 2%. Total expenditure will exceed total revenue, leaving a deficit of 3.34 trillion yuan. This figure is 180 billion yuan higher than the budgeted figure at the start of 2023 and will be supplemented through the issuance of government bonds.
60.783 billion yuan is budgeted for diplomatic endeavors, up 6.6%
1.66554 trillion yuan is budgeted for national defense, up 7.2%
227.662 billion yuan is budgeted for public security, up 1.4%
164.936 billion yuan is budgeted for education, up 5%
370.828 billion yuan is budgeted for science and technology, up 10%
140.636 billion yuan is budgeted for stockpiling grain, edible oils, and other materials, up 8.1%
777.315 billion yuan is budgeted for debt interest payments, up 11.9%
10.2037 trillion yuan will be transferred to local governments. This represents an increase of 4.1% after the deduction of special transfer payments to support primary-level governments in implementing tax and fee cuts and ensuring key public wellbeing projects as well as one-off subsidies for post-disaster recovery and reconstruction and capacity building for disaster prevention, mitigation, and relief.
Key Highlights of Li Qiang’s work report
Li characterized the international environment as “unusually complex”. Later, he added “Globally, the economic recovery was sluggish. Geopolitical conflicts became more acute, protectionism and unilateralism were on the rise, and the external environment exerted a more adverse impact on China’s development.”
In terms of the year’s data, he said:
China’s gross domestic product (GDP) surpassed 126 trillion yuan, an increase of 5.2%, ranking China among the fastest-growing major economies in the world.
12.44 million urban jobs were added; the average surveyed urban unemployment rate stood at 5.2 percent.
CPI rose by 0.2 percent.
Grain output reached a record of 695 million metric tons.
Per capita disposable income of residents increased by 6.1 percent
Per capita income in rural areas that have been lifted out of poverty growing by 8.4 percent.
Some successes he talked about:
C919, a homemade airliner, went into commercial operation, and a domestically-built large cruise ship was delivered. China accounted for over 60 percent of global electric vehicle output and sales.
Substantial progress was made in the research and development (R&D) of high-end equipment, such as aircraft engines, gas turbines, and 4th-generation nuclear power units.
In terms of challenges, he said:.
“A drop in external demand coincided with a lack of domestic demand, and both cyclical and structural issues arose. Risks and potential dangers in real estate, local government debt, and small and medium financial institutions were acute in some areas.”
Then, Li talked about other actions that were taken or achievements made. I am doing a summary of what I think are key points because a lot of it is very general comments.
In terms of post-COVID challenges, Li said that, “we took coordinated steps to ensure stable growth and sustain its momentum, and gave priority to consolidating the foundations of the economy and taking targeted steps. We ensured the proper timing, intensity, and effect in conducting macro regulation, and strengthened counter cyclical adjustments. We refrained from resorting to a deluge of stimulus policies or strong short term stimulus measures…”
In science and technology, he said that “we adopted an overarching plan to advance new industrialization…5G penetration rate in China topped 50 percent…the share of permanent urban residents in the total population rose to 66.2 percent.
A master plan for building a unified national market was released … The volume of foreign trade was kept stable and its mix was improved, and there was a 30 percent increase in exports of the new trio, namely, electric vehicles, lithium ion batteries , and photovoltaic products.
“Policies were adopted to support the development of green and low carbon industries. Ultra low emission retrofitting was carried out in key industries . Trials for peaking carbon emissions began in the first group of cities and industrial parks . China actively participated in and promoted global climate governance.”
Over 33 million people lifted out of poverty found jobs last year.
He ended this section by saying:
“We owe our achievements in 2023 to General Secretary Xi Jinping,who is at the helm charting the course, to the sound guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, to the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, and to the concerted efforts of the whole Party, the armed forces, and Chinese people of all ethnic groups.”
He then said this about the challenges ahead:
“While recognizing our achievements, we are keenly aware of problems and challenges that confront us. Global economic growth lacks steam, and regional hotspot issues keep erupting. This has made China’s external environment more complex, severe, and uncertain. The foundation for China s sustained economic recovery and growth is not solid enough, as evidenced by a lack of effective demand, overcapacity in some industries, low public expectations, and many lingering risks and hidden dangers. Furthermore, there are blockages in domestic economic flows, and the global economy is affected by disruptions. Some small and medium sized enterprises (SMEs) face difficulties in their operations . We are confronted with both pressure on overall job creation and structural employment problems, and there are still many weak links in public services. Some primary level governments are facing fiscal difficulties. China s capacity for scientific and technological innovation needs to be further improved. There are still many challenging issues concerning reform s in key areas that need to be addressed. We have a long way to go in protecting and improving the environment, and weak links in workplace safety should not be ignored. There is also room for improvement in the work of the government. Pointless 10 formalities and bureaucratism remain formalities and bureaucratism remain acute, and some reform and development acute, and some reform and development steps have yet to be fully implemented. Some officials lack the readiness to get down to work, evade responsibilities, and do their work in a perfunctory way. Corruption remains a common problem in some sectors.”
He then outlined the following as tasks going forward:
follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era
implement the guiding principles from the Party’s 20th National Congress and the Second Plenary Session of the 20th Party Central Committee
act on the guidelines of the Central Economic Work Conference
adhere to the general principle of pursuing progress while ensuring stability
fully and faithfully apply the new development philosophy on all fronts, move faster to create a new pattern of development, and promote high-quality development
deepen reform and opening up across the board
achieve greater self-reliance and strength in science and technology
strengthen macro regulation
expand domestic demand and deepen supply-side structural reform
promote new urbanization and all-around rural revitalization in a coordinated way
ensure both high-quality development and greater security
boost economic vitality, preventand defuserisks, and improve public expectations
consolidate and build momentum for economic recovery and growth
continue to effectively pursue higher-quality economic growth and appropriately increase economic output
improve the people’s wellbeing
maintain overall social stability
Then, Li offered the main targets for development this year:
GDP growth of around 5 percent
over 12 million new urban jobs
surveyed urban unemployment rate of around 5.5 percent
CPI increase of around 3 percent
growth in personal income in step with economic growth
a basic equilibrium in the balance of payments
grain output of over 650 million metric tons
a drop of around 2.5 percent in energy consumption per unit of GDP
continued improvements in the environment
He added: “We should adhere to the principles of pursuing progress while ensuring stability, promoting stability through progress, and establishing the new before abolishing the old. Stability is of overall importance, as it is the basis for everything we do. All localities and government departments should adopt more policies that are conducive to keeping expectations, economic growth, and employment stable. They should take good care in formulating measures that could be contractionary or inhibitive in nature and overhaul or abolish policies and regulations that hinder high quality development. Making progress is our goal, and it is also what motivates us. Therefore, we should proactively establish what is needed and resolutely abolish what is obsolete once the new is in place. In particular, we must push ahead with transforming the growth model, making structural adjustments, improving quality, and enhancing performance.”
In terms of spending, Li set new targets:
“The deficit to GDP ratio for this year is at 3 percent and the government deficit at 4.06 trillion yuan, an increase of 180 billion yuan over the 2023 budget figure.”
“General public expenditures in the government budget are projected to reach 28.5 trillion yuan, an increase of 1.1 trillion yuan over last year. This year, 3.9 trillion yuan of special purpose bonds for local governments will be issued, an increase of 100 billion yuan over last year.”
“To systematically address funding shortages facing some major projects for building a great country and advancing national rejuvenation, it is proposed that, starting this year and over each of the next several years, ultra long special treasury bonds be issued. These bonds will be used to implement major national strategies and build up security capacity in key areas. One trillion yuan of such bonds will be issued in 2024.”
“The central government will increase transfer payments to local governments for ensuring equal access to basic public services, which will appropriately tilt toward regions facing economic difficulty Governments at the provincial level, meanwhile, should allocate more fiscal resources to lower level governments to see that, at the primary level, basic living needs are met, salaries are paid, and governments function smoothly.”
“We should fully implement structural tax and fee reduction policies, with priority given to supporting scientific and technological innovation and the development of the manufacturing sector.”
In all this, Li added that “we must tighten up financial and economic discipline and intensify oversight on accounting Prestige and vanity projects and wasteful and excessive spending will be strictly prohibited.”
On monetary policy, he called to “maintain adequate liquidity at a proper level and see that aggregate financing and money supply stay in step with the projected economic growth and CPI increase.” He added: “We should boost the development of technology finance, green finance, inclusive finance, pension finance, and digital finance. To better meet the fundraising needs of micro, small, and medium enterprises, supporting measures such as credit enhancement, risk sharing, and information sharing should be improved.”
On macro policy synergy, Li reiterated:
“we should strengthen coordination between fiscal, monetary, employment, industrial, regional, scientific and technological, and environmental policies and include non economic policies in the evaluation of the consistency of macro policy orientation. Policy coordination should be enhanced so that all policies are well aligned and form synergy … In policy implementation, we should strengthen coordination and interplay between policies to see that together they deliver greater outcomes. We should avoid focusing on one single policy to the detriment of others or letting one policy impede another.”
On coordinating development and security, he said: “We should ensure that high quality development and greater security reinforce each other and do more to pursue development and provide assistance to enterprises on the basis of ensuring security.”
He added: “We should continue to improve the people’s wellbeing as we pursue development, address inadequacies in public wellbeing from the perspective of development, and foster new growth driver’s in the course of solving pressing difficulties and problems that concern the people most. Ultimately high quality development depends on reform. We should deepen reform and opening up with greater resolve and effort, promote better interplay between an efficient market and a well functioning government, further stimulate and boost the vitality of our society, and strive to make greater progress in pursuing high quality development.”
Thereafter, Li talked about the tasks for 2024:
1. Striving to modernize the industrial system and developing new quality productive forces at a faster pace. Under this, he mentioned:
Upgrading industrial and supply chains: “An initiative for pursuing high quality development of key manufacturing chains will be launched, with a focus on shoring up weak links, reinforcing strengths, and fostering new capabilities, so as to enhance the resilience and competitiveness of industrial and supply chains.”
Fostering emerging industries and future oriented industries: “We will launch industrial innovation projects, improve the industrial ecosystem, expand application of innovations, and promote integrated and clustered development of strategic emerging industries. We will consolidate and enhance our leading position in industries such as intelligent connected new energy vehicles, step up development of hydrogen power, new materials, innovative drugs and other cutting edge sectors, and foster new growth engines in fields such as biomanufacturing, commercial spaceflight, and the low altitude economy. We will formulate development plans for the industries of the future, open up new fields such as quantum technology and life sciences, and create a number of zones for pioneering the development of future oriented industries. We will encourage the development of venture capital and equity investment and improve the functions of industrial investment funds. We will strengthen coordination, planning, and investment guidance for key sectors to prevent overcapacity and poor quality, redundant development.”
Promoting development of digital economy: “We will step up R&D and application of big data and AI , launch an AI Plus initiative, and build digital industry clusters with international competitiveness. We will work to digitalize the manufacturing sector and fast track the large-scale application of the Industrial Internet . We will also promote the digitalization of the service sector, build smart cities and digital villages, and launch an initiative to promote SME digitalization. We will support platform enterprises in playing their part in promoting innovation, boosting employment, and competing on the international stage.”
2. Invigorating China through science and education and consolidating the foundations for high-quality development. Under this, Li mentioned:
Developing a high-quality education system. This entails launching an initiative to upgrade basic education, continue efforts to relieve students of excessive burdens from homework and off-campus tutoring, improving special needs education and continuing education, guiding and regulating the development of private education, and redoubling efforts to improve vocational education, etc.
Boosting self-reliance and strength in science and technology. Under this, he said: “To meet major national strategic demands and demands of industrial development, we will launch a number of major science and technology programs. We will pool our country's strategic scientific and technological strength and non governmental innovation resources to make breakthroughs in core technologies in key fields and step up research on disruptive and frontier technologies…We will reinforce the principal role of enterprises in scientific and technological innovation, encourage enterprises to increase investment in innovation, promote closer collaboration between industries, universities, research institutes, and end users, and support enterprises with distinctive strengths in heading up major R&D projects. We will strengthen R&D and application of technologies that promote people's wellbeing in such fields as health and elderly care. We will speed up efforts to establish basic systems for supporting all around innovation, further reform the appraisal and reward systems for scientific and technological advances and the management system for research projects and funding, and improve the open competition mechanism for selecting the best candidates to lead research projects. We will bolster intellectual property rights protection and formulate policies and measures for better application of scientific and technological advances.”
Developing and making the best use of talent in all sectors
3. Expanding domestic demand and promoting sound economic flows. Under this, he says:
“We will develop new types of consumption, launch policies to promote digital, environmentally-friendly, and health-related consumption, and foster new areas of consumption growth such as smart homes, entertainment, tourism, sports events, and domestic brands with Chinese design elements.”
“While stabilizing and expanding conventional consumption, we will encourage and promote consumer goods trade-in programs and boost spending on intelligent connected new-energy vehicles, electronic products, and other big-ticket items. Efforts will be made to upgrade elderly and child care, housekeeping and other services and make them more accessible, and support will be given to private entities providing community services.”
To improve the consumption environment, we will launch a year-long program to stimulate consumption and roll out a ‘worry-free consumption’ initiative.
On investment, he talked about spending on supporting major scientific and technological innovation programs, new types of infrastructure, and energy conservation and pollution and carbon reduction initiatives, and infrastructure for flood prevention, drainage, and disaster response, encourage upgrading and technological transformation of production and service equipment, and accelerate implementation of major projects included in the 14th Five-Year Plan.
“This year, 700 billion yuan will be earmarked in the central government budget for investment. We will appropriately expand the range of areas and uses to which funds from the sale of local government special purpose bonds can be channeled. These funds will be weighted toward regions where projects are well prepared and investments are more effective. We will ensure all funds are used in a coordinated manner and guard against ineffective and wasteful investments.”
4. Deepen reform and boost internal momentum for development. Under this, he said:
“We will strive to create a sound environment in which enterprises under all forms of ownership can compete and grow on a level playing field…class enterprises. The initiative to deepen and upgrade SOE reform will be advanced to see that SOEs improve their core business, enhance their core functions, and increase their core competitiveness…We will fully implement the guidelines and their supporting measures on promoting the development of the private sector and further address prominent problems concerning market access, access to factors of production, impartial law enforcement, and protection of rights and interests. The share of loans to private businesses will be increased, and the scale of financing for private businesses raised through bond issuance will be expanded. We will provide more assistance and support to self employed individuals on a category by category basis.”
“We will formulate guidance on standards for the development of a national unified market, with a focus on the establishment of unified rules and institutions covering areas such as property rights protection, market access, fair competition, and social credit. Comprehensive reform trials for the market based allocation of production factors will be advanced. We will issue administrative regulations for fair competition review and improve regulatory rules covering key areas, emerging fields, and foreign related domains. We will take targeted steps to address prominent problems, such as local protection, market segmentation, and unfair competition in attracting foreign investment, and step up regulation over public bidding.”
5. Pursuing high-standard opening up
“We will intensify support for import and export credit and export credit insurance and improve cross border settlements, risk management for foreign exchange, and other services; we will support businesses in diversifying overseas markets. We will promote the healthy development of cross border e-commerce and other new forms of business…Imports of high-quality goods will be boosted.”
“We will further shorten the negative list foreign investment. All market access restrictions on foreign investment in manufacturing will be abolished, and market access restrictions in services sectors, such as telecommunications and healthcare, will be reduced.” He talked about encouraging “foreign funded enterprises in China to reinvest in China.”
“We will make it easier for foreign nationals to work, study, and travel in China. We will keep working to upgrade pilot free trade zones, delegate more decision making power to free trade zones and the Hainan Free Trade Port, and encourage development zones to engage in reform and break new ground, so as to develop themselves into new pacesetters for opening up.”
On BRI, he talked about supporting the eight major measures for supporting high quality Belt and Road cooperation. We will steadily advance cooperation on major projects and implement a number of small and beautiful projects for improving the people's wellbeing. We will promote cooperation in fields such as digital development, green development, innovation, health, culture, tourism, and poverty reduction. Development of the New International Land Sea Trade Corridor will be accelerated.”
“We will move forward with negotiations on building a Version 3.0 China ASEAN Free Trade Area and work toward joining the DEPA and the CPTPP.”
6. Coordinating development and security. Under this, he said:
Improve the coordination mechanisms for addressing major risks
“Refine real estate policies and meet justified financing demands of real estate enterprises”; he also called to “move faster to foster a new development model for real estate.”
“We will make concerted efforts to defuse local government debt risks while ensuring stable development. We will implement a package of measures to defuse risks caused by existing debts and guard against risks arising from new debts.”
“We will take prudent steps to defuse risks in small and medium financial institutions in some localities and take tough measures against illegal financial activities.”
We will improve the system of financial regulation and raise our capacity for preventing and controlling financial risks.
He talked about food and energy security, and added that “our capacity for ensuring internet and data security will be further enhanced. We will effectively safeguard the security and stability of industrial and supply chains to ensure smooth flows in the national economy.”
7. Advancing work related to the “three rurals” and rural revitalisation
8. Advancing coordinated regional development
9. Enhancing green and low-carbon development
“We will push forward with the green transformation of the industrial structure, the energy mix, and the transportation sector as well as urban and rural development. We will implement a comprehensive conservation strategy and accelerate efforts to upgrade water and energy conservation facilities in key sectors. We will improve fiscal, tax, financial, investment, and pricing policies in support of green development as well as relevant market based mechanisms. We will support the development of industries for recycling waste and used materials, encourage the R&D and application of advanced energy saving and carbon reducing technologies, and accelerate the development of green and low carbon supply chains. We will launch pilot zones for the Beautiful China Initiative and foster pacesetters for green and low carbon development.”
“We will carry out the 10 major initiatives for peaking carbon emissions and improve our carbon accounting and verification capacities. We will develop a carbon footprint management system and expand the coverage of the national carbon market to more sectors. We will advance the energy revolution, tighten control over fossil fuels consumption, and work faster to develop a new energy system. We will step up the building of large scale wind and photovoltaic power bases and transmission routes and promote the development and use of distributed energy sources. We will create new ways of storing energy and encourage the use and international mutual recognition of green electricity. We will see that coal and coal fired power play their crucial role in ensuring energy supply and our energy supply meets the needs of economic and social development.”
10. Ensuring people’s livelihood and better social governance. This deals with employment, social security, food and drug safety, medical care, etc.
Towards the end, on security and defense, he said:
“We will consolidate and enhance integration of national strategies and strategic capabilities, refine the system and layout of defense related science, technology, and industries, raise public awareness concerning national defense, and strengthen national defense mobilization and readiness of reserve forces.”
On Taiwan, he said:
“We will implement our Party’s overall policy for the new era on resolving the Taiwan question, stay committed to the one China principle and the 1992 Consensus, and resolutely oppose separatist activities aimed at ‘Taiwan independence’ and external interference. We will promote the peaceful development of cross Strait relations, be firm in advancing the cause of China’s reunification, and uphold the fundamental interests of the Chinese nation. By advancing integrated cross Strait development, we will improve the wellbeing of Chinese people on both sides so that together, we can realize the glorious cause of national rejuvenation.”
On foreign policy, he said:
“We call for an equal and orderly multipolar world and universally beneficial and inclusive economic globalization, and we are committed to promoting a new type of international relations. We will remain firm in opposing all hegemonic, high handed, and bullying acts and upholding international fairness and justice. China is ready to pursue the Global Development Initiative, the Global Security Initiative, and the Global Civilization Initiative with other members of the international community so as to promote the shared values of humanity, reform the global governance system, and build a human community with a shared future.”