Policymakers in Beijing have been tasked with keeping the world’s second largest economy afloat after the coronavirus pandemic drove it through its first contraction since the 1970s. One of the most pressing problems they face is know how to create jobs for tens of millions of people who remained unemployed after the virus, but closed China for several weeks.
This year’s “Two Sessions” meeting will kick off on Thursday with a gathering of the top political advisers from the ruling Communist Party. The National People’s Congress – the country’s parliamentary legislature – will meet on Friday. Premier Li Keqiang is also expected to define certain economic goals for 2020, as well as the policies needed to achieve them.
So far, the government’s response to the economic fallout from the virus has totaled only tens of billions of dollars – a fraction of the trillions of dollars that other countries have injected into the pandemic.
Li’s report will be particularly remarkable this year due to the pandemic and the deterioration of US-China relations, wrote Iris Pang, chief economist for Greater China at ING, in a recent research note. It is not even clear whether China will set a target for GDP growth, as it has done every year for decades.
The coronavirus has infected more than 84,000 people and killed more than 4,600 in China, according to Johns Hopkins University. Beijing says the worst of the epidemic is now over, but the economic fallout is not. Chinese authorities have noted in recent weeks, for example, that the country’s export activities have been affected while other countries are struggling with the pandemic.
The mutual guilt of the coronavirus pandemic has also rekindled tensions between China and the United States, increasing the possibility that the two may resuscitate their deadly trade war.
Job creation is of great political importance to the leaders of the Chinese Communist Party, who see employment as the key to social stability. Some experts estimate that around 80 million people may already be unemployed in the country, which is almost double the official unemployment rate.
The government could take several approaches to address this problem, as well as work toward its goal of eliminating poverty by the end of 2020. For example, major national projects, such as plans to build new roads or railways, could give priority to the employment of the poor, according to BNP Paribas economists.
Economists added in a research note late last week that they expect Beijing to approve more public spending, but how it will be done remains to be seen. Cash distributions, for example, would be important for households that do not have much disposable income, they said.
Pang said aid to small and medium-sized enterprises will also be essential, as many job losses have been concentrated there.
Pang also said that Beijing could announce in the two sessions a stimulus package equivalent to about 4% to 6% of GDP, which would represent about $ 560 billion to $ 840 billion.