1. Newsroom
  2. China's National People Congress: Criticism Misplaced
Menu
Analisi 10.03.2016

China's National People Congress: Criticism Misplaced

China's National People Congress: Criticism Misplaced

China’s National People Congress (NPC) commenced during the first week of March, where Premier Li Keqiang announced several economic targets for 2016. Most fell in line with expectations, including growth between 6.5% and 7.0%.


China’s National People Congress (NPC) commenced during the first week of March, where Premier Li Keqiang announced several economic targets for 2016. Most fell in line with expectations, including growth between 6.5% and 7.0%. Despite the well-advertised macro targets, criticism has surfaced that there remains a subtle emphasis on growth, implying that Beijing has chosen economic expansion over reform. This criticism is misplaced, in our view, and instead we argue that the NPC announcements provide Beijing even greater policy maneuvering towards reaching its desired results.

The NPC announcement used the language “between 6.5% and 7.0%” compared to “around” in previous years, which is where the point of contention exists. Some suggests that if Beijing was more adamant towards its reform agenda, the NPC would have reported a slower economic growth, verbiage of “around 6.5%.” What is easily forgotten though is the economic growth target is contingent on job creation. This target is easily achievable mainly because China is experiencing the unwanted desire of a shrinking labor force. Falling since 2012, China’s working age population, which is defined as those between the ages of 15-64, is about 853.7mn in 2015 according to the UN Data, falling about 10mn from the peak. With fewer entering the labor force compared to those retiring, Beijing can then promote an economic policy that fits better with this labor force dynamic, which would likely be closer to the lower end of the NPC’s target, i.e. “around 6.5%.”

However, creating 10m urban jobs is not anodyne for the economy, and instead the focus should be net job creation. The NPC working paper highlighted efforts to further engage in supply side reform. As such, Beijing is taking the unpopular decision to improve the competitiveness of state owned enterprises (SOE), including plans that could lead to 1.3mn job cuts in the coal sector and 500k cuts in the steel industry. With an investment emphasis looking into the new economy of service industries, the challenge will be whether those who are impacted by SOE reforms can be absorbed by the stronger components of the economy.

Christopher Chu
Christopher Chu, Assistant Fund Manager - Asia

Expertise

Impact investing - Contributing to a more sustainable future

What are the key features of impact investing?

Read more

Le news più lette

Analisi 01.10.2020

COVID-19: UBP vi terrà aggiornati

Dalla comparsa del coronavirus, UBP accompagna e sostiene i suoi clienti nel contesto inedito di questa crisi sanitaria mondiale. La Banca vi aggiorna regolarmente sull’adeguamento dei suoi piani alle regole precauzionali fissate dalle autorità e condivide con voi le più aggiornate analisi dei suoi esperti sulle conseguenze della pandemia per l’economia mondiale e i mercati finanziari.

Analisi 30.06.2020

Aggiornamento delle prospettive di investimento per il 2020

L’economia globale al bivio

Analisi 24.06.2020

Market turmoil brings new opportunities for pragmatic investors

March 2020 was difficult time for many investors, as COVID-19 spread across Europe and the US, leading to sharp sell-offs in fixed-income credit markets. While such market turbulence is not to be welcomed, its occurrence can create opportunities.

Altro da leggere

Analisi 23.10.2020

Podcast - No election rally for the dollar

Our Global Head of Forex Strategy, Peter Kinsella, shares his thoughts on the forthcoming US presidential election.

Analisi 15.10.2020

The draw of the booming fintech sector

Martin Moeller, Portfolio Manager of our newly launched strategy, shares his view on why global fintech equities are an interesting investment right now.

Analisi 05.10.2020

Webinar – Opportunities in the Gold Mining Sector

On Thursday 1 October 2020, UBP's experts Norman Villamin and Peter Kinsella hosted a webinar with Evy Hambro, Global Head of Thematic and Sector Investing at Blackrock, to discuss what gold investors can expect in the quarters ahead.