China’s Two Sessions 2023: Boosting Consumption at All Costs

As China and its economy regain momentum after three years of strict Covid controls, the country’s top lawmakers and political leaders gathered in Beijing this week to discuss governance, the economy, the budget and a range of other key issues. The meetings form part of the annual week-long gathering known as the “Two Sessions,” or lianghui.

Expanding domestic demand is the government’s top priority for 2023. In 2022, China failed to meet its GDP growth target of 5.5%, with the economy growing by 3% instead. For 2023, China set an annual GDP growth target of around 5% and is counting on higher consumer spending to support the country’s economy.

A significant part of this year’s growth strategy focuses on stimulating consumer spending, particularly in technology-related areas. Beijing expects consumers to make more major purchases, such as cars, and to spend more through various retail platforms.

The country also plans to expand network infrastructure. Priorities include continued growth in new energy vehicles and charging stations, support for emerging e-commerce models, the rollout of 5G infrastructure in smaller cities, and the construction of national data centers in designated regions.

Buy More Electric Vehicles
China will continue promoting the adoption of electric vehicles as part of its economic stimulus measures to boost consumption and “consolidate its leading position” in the new energy vehicle industry, policymakers said in this year’s annual Government Work Report.

The government will also encourage wider use of battery-swapping technology and continue supporting the battery industry.

The Two Sessions also provide an opportunity for executives from both private and state-owned companies to submit policy recommendations to China’s top legislative and political advisory bodies.

Most proposals from executives at domestic automakers echoed the government’s priorities.
Feng Xingya, General Manager of GAC, Toyota and Honda’s manufacturing partner in China, called on the government to introduce supportive policies to reduce the cost of constructing battery-swapping facilities and promote standardized battery designs across different manufacturers.

Zeng Yuqun, Chairman of CATL, called for the establishment of a quality assessment system to pave the way for wider deployment of lithium-ion batteries for grid-scale energy storage.

Lei Jun, CEO of Xiaomi and a delegate to China’s top legislature, the National People’s Congress (NPC), proposed that China introduce automotive data security standards and facilitate data sharing among companies to support the development of intelligent connected vehicles.

In addition, He Xiaopeng, CEO of Xpeng Motors, called for new legislation to clarify liability in traffic accidents involving autonomous vehicles.

More Online Shopping
Expanding consumption is key to achieving China’s 5% economic growth target this year as the country seeks to recover from the slowdown caused by strict Covid-19 controls. China’s economic planners see significant potential in e-commerce platforms as a driver of growth.

Strong export growth in the first half of 2022 supported China’s economy, while the country’s total trade in goods reached a record RMB 42.07 trillion ($6 trillion).

Cross-border e-commerce exports rose by 11.7% to RMB 1.55 trillion in 2022, reflecting the growing importance of overseas online retail as a component of China’s export trade.

In this year’s annual government report, authorities pledged to strengthen support for cross-border e-commerce and the development of overseas warehouses.

On the domestic market, Chinese authorities pledged to guide the development of emerging models such as livestream e-commerce and on-demand retail, while steering the sector toward high-quality growth.

Wang Yinxiang, an NPC deputy from Cao County, a manufacturing hub for clothing and coffins in eastern China’s Shandong Province, found during her research that e-commerce in her rural county had helped increase the average life expectancy of local residents.

The county is known as a Taobao Village, where at least 50 households operate stores on Alibaba’s Taobao e-commerce platform.

More 5G, Data Centers and Other Infrastructure
This year, China will continue building and upgrading modern infrastructure systems, including 5G, data centers and the Internet of Things.

In particular, China will focus on expanding internet connectivity in small and medium-sized cities. The government intends to accelerate the development of 5G and broadband networks and promote greater integration between cloud and network infrastructure.

The country will also continue expanding data centers and computing hubs planned under the national East-to-West Computing Capacity Diversion Project, which aims to shift data processing from China’s prosperous but land-constrained eastern regions to less developed western regions.

In addition to network and data transmission infrastructure, Beijing said it plans to support the construction of smart highways, civilian space infrastructure and a commercial spacecraft launch center on the southern island of Hainan.

Liu Qingfeng, CEO of voice-recognition company iFlytek, proposed accelerating the development of artificial intelligence models in China in order to capitalize on the AI boom.
Liu noted that although Chinese institutions and companies had launched a number of large-scale models, their level of “intelligence” remained significantly below that of OpenAI’s ChatGPT. He called on China to accelerate AI development.