Li’s work report indicates that Beijing will rely heavily on issuing debt to meet its 2025 growth target.
The Chinese Communist Party held its annual plenary meeting of its top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC), and its rubber-stamp legislature, the National People’s Congress (NPC), in the first two weeks of March.
Known as “lianghui” in Mandarin, the Two Sessions is where Beijing lays out its economic development goals for the year. Beijing also sometimes reveals key signals on politics, international affairs, and other areas at the Two Sessions.
Here are three takeaways from the 2025 Two Sessions.
China’s economic prospects are bleak
Premier Li Qiang painted a glowing image of China’s economy in his annual government work report delivered at the third session of the 14th NPC on March 5. Li first noted that the government overcame challenges, maintained “overall economic stability,” and made steady progress last year in the face of many domestic and international challenges. He credited the “strong leadership” of Party Central with Comrade Xi Jinping at the core for the government having met his 2024 economic and social development targets.
However, Li’s boasts do not stand up to scrutiny. Many observers were left deeply skeptical that China hit its official growth target of 5 percent in 2024 after examining the CCP’s own data and other indirect economic indicators. We earlier estimated using official data that China’s actual GDP growth rate was 3.6 percent. Meanwhile, Li omitted details that reflect economic contraction, increased capital outflows, a deficit in the balance of international payments, and a worsening business environment for private companies. Per the CCP’s usual mode of operations, Li had cherry-picked “achievements” and sought to “spin tragedy into victory” in his report.
Li’s talking up of the economy instead of being frank about the problems could return to haunt Beijing. Officials who believe the propaganda or do not want to offend Xi Jinping will likely keep reporting only “good news” and other misinformation to Party Central. Trapped in an echo chamber of “success,” the Xi leadership will struggle to craft timely and effective measures to address current pressing economic issues and fresh troubles that could crop up.
In outlining economic policies and work arrangements for 2025, Li Qiang offered no fresh approaches to how Beijing is looking to turn around the economy. Most of the measures, like having a “proactive fiscal policy,” a “moderately loose monetary policy,” and constructing a “unified national market,” were introduced last year, but have been thus far ineffective and insufficient in reviving demand, or have not seen much progress. Li said that Beijing wants to support the development of high-tech industries and “future industries,” but offered scant details on how this would be done.
Li’s work report indicates that Beijing will rely heavily on issuing debt to meet its 2025 growth target. Large-scale government borrowing, however, will drain liquidity from the banking system and capital markets, place downward pressure on the renminbi, and increase the risk of capital outflows. The end result is heightened systemic financial risks in China.
To achieve its economic objectives, Beijing wants government officials and Party cadres to properly implement Xi Jinping’s directives and policies. Li Qiang stressed in his report that the government’s work must be guided by Xi Jinping Thought and adhere to the “spirit” of several key political conclaves. He also urged officials to rally more closely around Xi. Such exhortations, however, are unlikely to be effective as officials steeped in Party culture will tend to prioritize the securing of their interests and self-preservation over the regime’s broader interests and survival.
Communist China sticks to agenda of global domination
Li Qiang noted in his work report that a “more complex and severe external environment” had placed greater pressure on China’s trade and technological sectors in 2024. He also noted the impact of geopolitical tensions on China’s economy, such as the disruption of industrial and supply chains and increased market volatility.
Naturally, Li does not identify the CCP’s long-term efforts to displace the United States as the world’s hegemon and the resulting pushback from the international community as a key factor behind why the world saw “accelerated changes unseen in a century.” If anything, the CCP doubled down on its global agenda at the Two Sessions at foreign minister Wang Yi’s press conference on March 7.
Wang basically rehashed the CCP’s current diplomatic line, which has deeply troubled the international community and led to growing geopolitical pressure on China, in his presser. For instance, Wang said that China-Russia relations are “stable,” promoted so-called “true multilateralism” and courted the Global South, and warned the U.S. against “bullying,” “containing,” and “suppressing” the PRC.
“Wolf warrior” rhetoric aside, Wang also indicated that the CCP is willing to work with its chief geopolitical rival. The U.S. and China, Wang said, have “extensive common interests and broad space for cooperation” and should “become partners helping each other succeed and prosper together.” Having experienced first-hand the unreliability and duplicitousness of the CCP in his first term, however, President Donald Trump and his administration are unlikely to be taken in by Wang’s “entreaty” and will likely ramp up pressure on China. Tough actions by the U.S. and its allies to counter the CCP threat will likely lead to the Chinese economy’s further deterioration, heightening social and political risks for Xi and the CCP.
Political stability a concern for Xi
The Xi leadership is likely aware that the global pushback to its stance on international affairs, its inability to turn around the economy, and its various governance failures could translate into political problems for Xi Jinping. Also, the nonstop circulation of rumors and speculation in overseas Chinese-speaking circles since after the Third Plenum of the 20th Central Committee in July 2024 about how Xi is “losing power” and losing control over the military likely indicates to Beijing that Xi is extremely unpopular and “anti-Xi” forces are working feverishly to secure his ouster.
Xi’s present grip on power is secure. At the Two Sessions, senior Party, government, and military officials lauded Xi for his “achievements” amid tough times for China, urged the study of his political theories, and made other remarks indicating their loyalty to him. After the Two Sessions, Beijing rolled out an “education initiative” meant to promote loyalty towards Xi Jinping through the studying of his speeches and the “spirit” of the Two Sessions. Yet the Xi leadership’s constant requirement of officials and cadres to “rally around” Xi Jinping suggests that the latter is uneasy about his political position.
The fate of a top official could shed some light on the current state of political stability in the PRC. On March 11, NPC Standing Committee chairman and Politburo Standing Committee member Zhao Leji was a no-show for the closing session of the 14th NPC — a very unusual development — due to a “respiratory infection.” Yet Zhao met with state journalists who cover the NPC for a presser the following day looking relatively well. Zhao’s absence from the NPC closing session could either be a non-issue, or the prelude to Black Swan events and political destabilization in the CCP.
