China’s Two Sessions 2017

Racepoint Global

Key Takeaways for the Technology Sector

China’s “Two Sessions” is an annual affair that sees more than 2,000 national political advisors offering proposals and insights for the government on policy direction for the coming year.

During the session, the central government reveals its annual work report, which includes the official gross domestic product (GDP) forecast as well as information on the defense budget and other major policies.

Political advisors will then hear and deliberate on a report about the work of the Standing Committee of the CPPCC National Committee and a report on how the Standing Committee has handled proposals from CPPCC National Committee members since the previous session.

Political resolutions are expected to be adopted at the meeting, which will be implemented across the country for the following year, affecting many industries.

Perspective for Marketers

From a thought leadership and media relations perspective, it’s important for company spokespeople to be informed on themes and takeaways from each year’s meetings. In order to showcase commitment to the market, gain local support and secure coverage, messaging across content development, interviews and company announcements should be localized to acknowledge and align with policy direction.

Overview of the 2017 Sessions

Overall, the policies and theme of this year’s two sessions lean towards a conservative, but stable growth for the Chinese economy and country. Beyond that, the following is a summarized list of the major areas of work, main development targets, fiscal and monetary policy for 2017.

Major areas of work

  • Continue to cut overcapacity and surplus inventory, deleverage, reduce costs, and strengthen points of weakness through reforms
  • Deepen the reform in important areas and key links (areas spanning fiscal and tax system, SOEs, and non-public sectors)
  • Further unleash the potential of domestic demand
  • Guide real economic transformation through innovation
  • Accelerate agricultural development and steadily increase incomes in rural areas
  • Proactively expand to global markets
  • Strengthen the management of environmental protection
  • Promote social development to ensure and improve the people’s well-being
  • Strengthen government development

Main development targets

  • Achieve GDP growth of around 6.5%
  • Maintain CPI increase of around 3%
  • Create at least 11 million new urban jobs
  • Keep registered urban unemployment rate within 4.5%
  • Maintain a steady increase in import and export volumes
  • Achieve a basic balance in international payments
  • Increase individual income in line with economic growth
  • Achieve a reduction in energy consumption of at least 3.4% per unit of GDP
  • Continue reductions in the release of major pollutants

Fiscal and monetary policy

  • Continue to maintain a proactive fiscal and steady monetary policy

Key Takeaways for the Technology Sector

1. Transforming and upgrading the real economy through innovation

This year’s work report emphasized the importance of transforming and upgrading China’s real economy. There are several pillars to achieving this, one of which is through innovation.

Strengthen capability in creating technological innovations and accelerate the development of emerging industries.

The real economy has always been the foundation of China’s development. It is therefore seen as imperative to transform and upgrade this sector to achieve global competitiveness. The report reiterates the need to implement an in-depth and innovation-driven development strategy, optimize the structure of the real economy, and continually improve its quality, efficiency, and competitiveness.
According to the government’s work report, China will accelerate the development of emerging industries, and promote innovation, especially in the manufacturing sector through big data, cloud computing, and industrial IoT applications. National smart manufacturing demonstration zones and manufacturing innovation centers will further support the development of this sector.

Innovation led development of the real economy will strengthen national power.

Revitalizing the real economy is crucial to enhancing its overall competitiveness. The main battlefield of revitalization relies on the manufacturing industry, with innovation at its core. Innovation will make China more competitive while meeting new market demands in the global supply chain.

Innovation needs to be embedded into core technology to make up for industrial shortcomings. Continued financial support for the real economy will also be a priority.

 

2. Strengthening the Semiconductor Industry

A proposal submitted at the two sessions by Li Dongsheng, NPC Deputy and President of leading consumer electronics enterprise TCL, advises that in 2017 the state should prioritize financial and policy support to strengthen the competitiveness of China’s semiconductor manufacturing industry. His proposal included the following points:

The state should maintain investments that support the semiconductor industry.

Strengthening the development of new electronic information industries is essential for China to become a leader by global standards. The semiconductor industry is considered the essential building block in enhancing the competitiveness of China’s wider technology sector. China needs to continue to grow government financial support to invest in domestic chip manufacturing and design projects. Another priority should be measures such as tax relief to alleviate the financial pressure for related enterprises.

The state should introduce more policies to support the semiconductor industry.

China’s domestic semiconductor industry needs support from national and local governments. In 2015, China’s demand for semiconductor products outstripped domestic supply by nine to one; with total spend reaching US$147 billion or 42% of the total semiconductor market. This not only results in a trade deficit, but also hampers the development of China’s information industry and is potentially harmful to national information security.
The next 10 years will be crucial for China’s semiconductor industry; policy should focus on implementing industry standards, strengthening the integration of market resources, encouraging the formation of industrial clusters, and finding a breakthrough in the market.