At the opening session of the National People’s Congress (NPC), China’s parliament, Premier Li Keqiang delivered his work report, announcing a reduction in the GDP growth target for this year to a range of 6% to 6.5%, down from the 2018 target of “about 6.5%”. The actual growth rate last year was 6.6%. He also announced a lower growth in defense spending of 7.5% to CNY1.19 trillion, compared to 8.1% last year. The year 2019 is to be the fourth year of single-digit growth.

Another highlight of his speech was a reduction in taxes. Value-added tax (VAT) for the manufacturing sector will be cut from 16% to 13%, and that for the transportation and construction sectors will be lowered from 10% to 9%. The VAT cuts are bigger than expected, namely a 3 percentage points cut in VAT for manufacturers and a one percentage point cut for transport and construction firms. The three-tier VAT structure remains and the lowest tier of 6% VAT also remains unchanged.The fiscal shortfall as a result of the tax cuts will be made up by higher profit contributions by state-owned financial institutions and state-owned enterprises (SOEs), and a reduction in government spending. VAT is the single biggest tax item in China, with revenues in 2018 accounting for 40% of China’s total tax revenues. China’s new 13% VAT tax rate for manufacturers is not a low in Asia. Vietnam, South Korea, Australia and Indonesia all implement a 10% VAT tax rate. Premier Li warned that tax cuts will create a “huge burden” for governments at all levels, which will now need to tighten their belts, and SOEs will have to hand in more profits. Moreover, commercial banks will have to increase loans to small and medium-sized firms by 30% this year.

Premier Li also admitted that “trade disputes” with the U.S. had generated “negative impacts” on some business operations and market expectations. Amid the economic slowdown and restructuring, employment will receive greater attention this year. New graduates, retired army soldiers and migrant workers will be the main targets for government support. In reviewing China’s achievements in 2018, Li didn’t mention the “Made in China 2025” program. In fact, the phrase “Made in China 2025” was not even mentioned in this year’s government work report, although it was very prominent in last year’s report. “Both anticipated and unanticipated risks will intensify, and we have to be well prepared for a hard battle,” Premier Li Keqiang said.

A total sum of CNY577.6 billion is budgeted for investments this year, CNY40 billion more than last year. China Railway Corp plans to put a total of 6,800 km of new railway track into service this year, a 45% increase in expansion from 2018. Li Keqiang said the central government will cut its paperwork by at least one-third in 2019 and governments at all levels must stop pointless formalities and bureaucracy. “We should free government employees from the mountains of documents and endless meetings. Instead, they should spend their energy on solving real problems,” the Chinese Premier said.

The most important two weeks on China’s political agenda kicked off on March 3 when the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) opened its annual meeting, followed on March 5 by the second session of the 13th National People’s Congress (NPC). The CPPCC is an advisory body where proposals are submitted and discussed; while the NPC is China’s legislative body, supervising and setting government policy and enacting laws.

This week, China’s draft foreign investment law is to be submitted to the NPC session for review and approval. The progress of enacting the legislation has been comparatively fast, indicating the importance of promoting foreign investment. The Standing Committee of the NPC conducted two rounds of reviews within little more than a month, in late December and late January. Once implemented, the law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises, which were mainly legislated between 1979 and 1988 and then revised. The draft law reflects experience on foreign investment governance that China has accumulated over the past decade. A focus of the law is equal treatment of local and foreign companies. China will continue its efforts to open up the economy and reduce market access restrictions on foreign investment, the Ministry of Commerce (MOFCOM) said. “The country will continue to optimize the environment for foreign investment, improve the transparency of market supervision and better protect foreign companies operating in China,” said Ministry Spokesman Gao Feng. An amendment to the Patent Law is also expected to be approved.

At the opening session of the CPPCC National Committee, Chairman Wang Yang did not mention the trade war with the U.S., but the South China Morning Post reports that “tensions between the world’s two biggest economies apparently set the tone for the speech and dominated talk among delegates on the sidelines of the event.” He said the CPPCC would focus on politics and stability this year, help to build a “moderately prosperous society” and fight battles against financial risks, poverty and pollution.

Ahead of the two meetings taking place in the Great Hall of the People along Tiananmen Square, China Unicom Beijing announced the launch of 5G coverage on and around the square, providing high-speed connections for HD live streaming coverage of the two sessions.