Stability and growth: Two Sessions' government work report spells out what China wants

The word "stability" (稳) appeared more than 80 times in the government work report delivered by Chinese Premier Li Keqiang on 5 March. This highlights that stability will not only be the priority for officials in all aspects of their work this year, but also a key theme for this year's Two Sessions (两会, Lianghui) - the annual meetings of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC).

The report is based on the meetings of the Political Bureau of the Chinese Communist Party (CCP) and the Central Economic Work Conference held in December last year, where "stability first" and "seeking progress while maintaining stability" were set forth as the key themes of China's economic work in 2022.

The report detailed how stability would be achieved through various policies, while seeking suggestions from thousands of NPC deputies and political members.

The report calls for efforts to stabilise the macro economy while ensuring that the economy grows within an appropriate range. China seeks to continue ensuring stability in the six fronts (六稳) of employment, the financial sector, foreign trade, foreign investment, domestic investment and expectations; and security in the six areas (六保) of job security, basic living needs, operations of market entities, food and energy security, stable industrial and supply chains and the normal functioning of grassroots governments. It also strives to strengthen cross-cycle regulation - with an objective to take pre-emptive actions to smooth out fluctuations in growth - to promote economic health. 　

In terms of monetary policies and the capital market, the report recommends enhanced implementation of a prudent monetary policy, keeping the macro leverage ratio at generally stable levels, and keeping the RMB exchange rate basically stable at a balanced level. It will also fully implement the stock issuance registration system and promote the stable and healthy development of the capital market.

In terms of real estate and housing security, the report reaffirmed the authorities' position that "houses are for living in and not for speculation" and strives to support the commercial housing market, to better meet the reasonable demand of homebuyers, and to stabilise land and housing prices, as well as expectations.

In terms of agriculture production, the report calls for the strengthening of stable agricultural production and supply, stabilising grains acreage and appropriately raising the minimum purchase price for wheat and rice. It would also ensure an adequate supply of fertilisers and other agricultural supplies and maintain stable prices.

As for China's carbon emissions peak and neutrality targets, CCP General Secretary Xi Jinping said on 5 March when attending the Inner Mongolia Autonomous Region delegation's deliberation that it is necessary to consider national conditions and be aware of actual situations on the ground, and not rush for quick results or conduct campaign-style carbon reduction activities. He emphasised that China must not prematurely throw away the old tools when the new tools are not yet available.

In recent years, Chinese officials have always emphasised the importance of "seeking progress while maintaining stability" in economic work. However, placing stability ahead of progress is a new move that was only made late last year. This implies that stability is the Chinese authorities' basic requirement for its economic and social development and foreign policy this year, to create better internal and external environments for the 20th Party Congress in the second half of the year.

"Stability first" is closely linked to the Chinese authorities' awareness of the international and domestic situations. The report presents a few assessments of the current situation: there is insufficient drive for recovery of the global economy, given the highly volatile commodity prices and a more complex and uncertain external environment; China's economy faces the triple pressures of shrinking demand, supply shocks and weakening expectations; there are sporadic local outbreaks of the coronavirus; consumption and investment recovery is slow, and it is becoming more difficult to stabilise exports, while medium, small and micro enterprises as well as private enterprises face difficulties in production and operations, making it tougher to stabilise employment; some regions have a widening fiscal deficit, with more risks and hidden pitfalls in the economic and financial sector; government efforts are insufficient, with obvious issues of formalism and bureaucracy, among other things.

The report concludes that China faces significantly more risks and challenges in its growth this year and will have obstacles to overcome. In other words, China faces more elements of internal and external instability, and the pursuit of stability is the way to overcome these obstacles.

The sudden Russia-Ukraine war shows the importance and urgency of stability. Some Chinese academics believe that the Russia-Ukraine war will force Western countries to focus more on dealing with Russia, which will ease the strategic pressure on China. While this is a valid view, it is not easy for China to keep a balanced position amid the faceoff between Russia and the West. If it is not properly managed, it can easily be labelled by the West as "taking sides", prompting the West to pick up the pace in decoupling from China's industrial and supply chains based on ideology, in which case China would lose its strategic advantage. At this point, the wise choice is for China to secure its role as a neutral mediator, and not cause any party to point its guns at China.

After the Russia-Ukraine war broke out, some hawkish mainland Chinese observers suggested that the People's Liberation Army should take the opportunity to reunite with Taiwan, sparking concerns among the authorities and people in Taiwan. However, these suggestions and concerns clearly did not grasp the Chinese authorities' view of stability.

The Chinese authorities believe that China's own development is the priority, while cross-strait reunification is not urgent. And so, their political position remains for "peaceful reunification under the 'one China' policy" (一中原则、和平统一), while firmly opposing a "Taiwan independence" secession and foreign interference.

The authorities believe that mainland China has the lead and advantage in cross-strait relations, and is fully capable of clamping down on a "Taiwan independence" and external forces crossing the bottom line of the Anti-Secession Law. But as long as that line is not crossed, mainland China will still hold on to its strategic anchor - adhering to "stability first" - and will not easily allow the Taiwan issue to dent the mainland's growth opportunities, nor will it initiate an armed reunification, which will result in onerous governance over Taiwan. Mainland China is determined to fulfil its strategic goal of modernising by 2035, after which the difficulty and cost of resolving the Taiwan issue will be much smaller.

Notably, the Chinese authorities have focused on "stability first" in their domestic and external policies to maintain China's growth trend and external environment built up over the past years. This stability does not mean being stagnant or idle; it can only be achieved through deepening reform and hard work. Stability is the foundation of progress, and the authorities' aim is still to overcome obstacles and push forward.

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