Support for struggling businesses . . .
Thursday marked the conclusion of the ‘Two Sessions,’ a major annual political event in China that includes a parallel gathering of the National People’s Congress, China’s legislature, and the Chinese People’s Political Consultative Conference, a political advisory body to the government. The event featured key announcements on economic policies, health policies, and other government plans for the coming year. Of particular note is the new recovery plan, which will consist of fiscal measures worth C$770 billion to support struggling business, including tax exemptions, lower interest rates for banks, waivers on contributions to social welfare funds, and reduced prices for utilities such as electricity. What’s more, the central government will raise an additional C$390 billion by increasing its deficit and issuing special government bonds. Local governments will raise an additional C$310 billion in special bonds.
Investments in social welfare, new infrastructure . . .
According to Premier Li Keqiang, who announced the economic recovery plan, central government funding will go directly to small companies and to local-level governments, such as counties and cities rather than provinces, in order to ensure that the assistance will be used to directly support people who rely on social security schemes, subsistence allowances, unemployment benefits, and old-age assistance, as well as others in difficult circumstances. Local government funding will be channeled to the building of new infrastructure, such as 5G networks, green vehicles, and other urbanization schemes that promote the development of ‘smart’ and environmentally-friendly cities.
Will it be enough? . . .
The current plan is a departure from previous stimulus plans and investment policies. In 2008, amid the global recession, the Chinese government’s investment focused on traditional forms of infrastructure, such as bridges and high-speed rail. This scheme ultimately led to an increase local government debt, and did not directly benefit vulnerable populations. It will be important to see whether China’s current approach can facilitate recovery while avoiding the side-effects of the 2008 stimulus.
- China Briefing: China’s Two Sessions 2020: what have we learnt so far?
- Ministry of Foreign Affairs of the People’s Republic of China: Premier Li Keqiang meets the press: Full transcript of questions and answers
- South China Morning Post: China pledges largest-ever economic rescue package to save jobs and livelihoods amid coronavirus