安永-《政府工作报告》透露的中国经济新格局（英文）-2021.3-10页_466kb

2021 Government Work Report Summary: Aiming at Quality Growth through Technology and Domestic Demand

Core Content

The 2021 Government Work Report, delivered by Premier Li Keqiang, emphasizes a cautious return to normalcy after the economic impact of the COVID-19 pandemic, with a focus on quality growth, technology innovation, domestic demand, environmental protection, and market opening. The report outlines a strategic approach to ensure economic stability and long-term development, particularly in the first year of the 14th Five-Year Plan.

Main Views and Key Information

1. Economic Growth Target and Policy Continuity

• The report reinstates a GDP growth target of ≥6.0% YoY for 2021, which is indicative rather than binding.
• The target reflects a base effect from the previous year's contraction due to the pandemic.
• The IMF projected a real GDP growth of 8.1% YoY for 2021.
• Employment remains a top priority, with a target of creating at least 11 million new jobs and keeping the urban surveyed unemployment rate below 5.5%.
• The government returns to 2019 targets to signal policy continuity and stability.

2. Fiscal and Monetary Policies

• Fiscal policy is described as proactive, efficient, and sustainable, with a fiscal deficit target of 3.2% of GDP, slightly higher than the 2.8% in 2019.
• Central government funding of RMB 2.8 trillion will be transferred to support local fiscal spending, including tax and fee cuts.
• Monetary policy adopts a gradualist approach, with money supply and total social financing growth aligned with nominal GDP growth, a slight reduction from the "significantly stronger" target in 2020.
• Lending to small and micro businesses is expected to rise by 30% YoY, and real economy interest rates will be further reduced.
• Targeted credit allocation will prioritize new technologies, micro-businesses, and rural sectors, while curtailing real estate-related loans.

3. Technology and Innovation

• Technology and innovation are central to China's modernization drive.
• The report outlines three key measures:
  1. Central government expenditure on foundational research will increase by 10.6% YoY.
  2. Tax deduction for R&D spending by manufacturing businesses will be raised to 100%.
  3. Tax incentives for equipment and technology upgrades will be expanded.
• The development of 5G networks and 1000M fiber optic networks will accelerate to support industrial internet and new technology applications.
• Self-reliant technology supply chains are a key objective, with local initiatives such as Shanghai's chip hub aiming to revitalize the semiconductor industry by 2025.

4. Boosting Domestic Demand

• The report focuses on enhancing social welfare and raising household income to stimulate consumption.
• Disposable income per capita is expected to grow in line with nominal GDP.
• Affordable housing is emphasized, especially for new migrants and young people in big cities.
• Rental and social housing supply will be increased.
• On the supply side, the government supports retail innovation, including online-offline integration and delivery expansion to rural areas.
• It encourages domestic consumption in sectors such as healthcare, culture, tourism, and entertainment.
• Recycling systems, car parks, and elimination of second-hand market restrictions will help promote home appliance and automobile consumption.

5. Environmental Protection

• The report sets a target of reducing energy intensity per unit of GDP by 3%.
• Additional environmental goals include:
  • 70% clean heating in northern China.
  • Corporate tax concessions for environmental impact improvements.
  • Accelerating the construction of national trading markets for energy consumption and carbon emissions.

6. Market Opening and Foreign Investment

• The government commits to high-level opening to foreign trade and investment.
• It plans to shorten the negative list for foreign investment and reform the service sector and cross-border service trade.
• Free Trade Zones, especially the Hainan Free Trade Port, are highlighted as key platforms for attracting and protecting foreign investors.
• The objective is to deepen multilateral and regional economic cooperation.

Summary Table of Key Targets

Conclusion

The 2021 Government Work Report outlines a strategic shift towards quality growth, emphasizing technology innovation, domestic demand, environmental protection, and market opening. It signals policy continuity and gradual normalization post-pandemic, with a focus on sustainability, self-reliance, and inclusive growth. The government aims to stabilize the economy, support employment, and lay the groundwork for the 14th Five-Year Plan.