CCG Luncheon on annual legislative sessions
March 14 , 2025Senior economists Bai Chong-En, Jin Li, Tang Min, Tian Xuan, and John Quelch share fresh insights with Beijing-based ambassadors into the political gathering in China.
Last Friday, March 14, the Center for China and Globalization (CCG) held its first CCG VIP Luncheon of 2025 in the historic Xianhe Hall of the Beijing International Club. The event featured
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Professor Bai Chong-En, Member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and Dean of the School of Economics and Management at Tsinghua University;
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Professor Jin Li, Member of the National Committee of the CPPCC, Vice President, Acting Dean of the College of Business, and Director of the SUSTech Academy of Finance and Economics at the Southern University of Science and Technology;
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Mr. Tang Min, former Counsellor of the State Council, former Deputy Secretary-General of the China Development Research Foundation (CDRF), and Vice President of CCG;
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Professor Tian Xuan, Delegate to the 14th National People’s Congress, Associate Dean of the People’s Bank of China (PBC) School of Finance at Tsinghua University, and President of the National Institute of Financial Research at Tsinghua University;
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Professor John Quelch, Executive Vice Chancellor and John deButts Professor of the Practice at Duke Kunshan University.
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The luncheon focused on the Two Sessions—the annual gathering of the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) that concluded last Tuesday.
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Mabel Lu Miao, Co-Founder & Secretary-General of CCG
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Distinguished guests, Your Excellencies, ladies and gentlemen, good afternoon. Thank you all for joining us today at the CCG VIP Luncheon. The “CCG VIP Luncheon” series is initiated and hosted by the Center for China and Globalization (CCG). This event aims to share China’s latest developments with embassies in China, international organizations, chambers of commerce, multinational corporations, and academic experts. It is a high-level platform for international exchange, providing insights into China’s development and exploring global cooperation opportunities.
Today’s luncheon will centre on this year’s Two Sessions, with discussions addressing key topics such as the comprehensive green transformation of economic and social development, technological progress, rural revitalisation, social governance, and infrastructure development. We will explore related issues and conduct analyses together.
We are honoured to have five distinguished panel discussants, including two members of the Chinese People’s Political Consultative Conference (CPPCC) National Committee and one delegate to the National People’s Congress (NPC), who have just concluded their participation in the Two Sessions. They will share their insights and perspectives with us.
Before we start, I would like to take a moment to acknowledge some of our distinguished guests and VIP attendees. We have invited diplomats from nearly 30 countries, including 18 ambassadors, along with representatives from international organisations, business councils, and the media.
The ambassadors in attendance include those from Austria, Barbados, Belgium, Croatia, Estonia, Greece, Israel, Indonesia, India, Iceland, Italy, Latvia, Luxembourg, Malta, Pakistan, Portugal, Romania, and New Zealand. Additionally, we have diplomats from embassies such as Brazil, the Delegation of the European Union to China, Germany, Hungary, Japan, Norway, Russia, and the United Kingdom.
Representatives from international organizations and business councils are also present, including those from the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations Children’s Fund (UNICEF), the Canada-China Business Council, the Danish Chamber of Commerce in China, and the U.S.-China Business Council. We are also joined by members of international media, including Kyodo News and NBC News.
On behalf of the Center for China and Globalization, I extend a sincere welcome and heartfelt thanks to all the experts and guests here today.
Next, I would like to invite our distinguished panellist and today’s moderator, Dr. Wang Huiyao, Founder and President of CCG and former Counsellor of the State Council, to moderate today’s panel.
Our panellists include:
• Professor Bai Chong-En, Member of the National Committee of the CPPCC and Dean of the School of Economics and Management at Tsinghua University.
• Professor Jin Li, Member of the National Committee of the CPPCC, Vice President, Acting Dean of the College of Business, and Director of the SUSTech Academy of Finance and Economics at the Southern University of Science and Technology.
• Professor John Quelch, Executive Vice Chancellor and John deButts Professor of the Practice at Duke Kunshan University.
• Mr. Tang Min, former Counsellor of the State Council, former Deputy Secretary-General of the China Development Research Foundation (CDRF), and Vice President of CCG.
• Professor Tian Xuan, Delegate to the 14th National People’s Congress, Associate Dean of the PBC School of Finance at Tsinghua University, and President of the National Institute of Financial Research at Tsinghua University.
Let’s welcome our five experts with a warm round of applause.
Henry Huiyao Wang, Founder & President of CCG
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We are privileged to have such five fabulous panellists with us today. As we proceed with our discussion, please feel free to continue enjoying your meal.
To start, I would like to highlight what we are going to talk about. The “CCG VIP Luncheon” series was launched last year, with 10 sessions successfully held. This is our first event of this year, and we felt a good subject to focus on would be the recently concluded Two Sessions—an event that is highly watched not only within China but also in the world.
Over the past eight days, approximately 5,000 representatives convened, including 3,000 NPC deputies and 2,000 CPPCC National Committee members at the Great Hall of the People. The sessions were extensively covered by 3,000 journalists, including 2,000 from China and 1,000 from international media outlets as well as Hong Kong, Macau, and Taiwan.
The Two Sessions are a spectacular annual political exercise for China to foster consensus, restore confidence—especially in the post-COVID era—and march on to the years ahead. This year, China achieved a GDP growth of 5%, with a target of another 5% for 2025.
The format for today’s discussion is that each panellist, freshly out of the Two Sessions, will talk about their key takeaways from this big event, with each speaker having approximately five to six minutes. Following that, we will have a Q&A session and open the floor for questions from our esteemed audience, including ambassadors and other distinguished representatives.
Now, I would like to invite Professor Bai Chong-En, a member of the National Committee of the CPPCC, Dean of the School of Economics and Management at Tsinghua University, and Vice-Chairman of the 13th All-China Federation of Industry and Commerce. Professor Bai, I’d like to start with you. I know you have just rushed from Tsinghua to this luncheon. What were the most impressive takeaways from this year’s Two Sessions for you?
Bai Chong-En, Dean of the School of Economics and Management, Tsinghua University
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Thank you, Huiyao, for the introduction. I am very glad and honoured to have this opportunity to share my thoughts about the Two Sessions. As you may know, two of the perennial themes of the Two Sessions are innovation and internal demand.
This year, the order of these two themes is different from the past years. In the past, innovation was always listed as the top priority. This year, the order changed. Internal demand, especially household consumption, became the top priority among the list of important works for the year 2025.
I will talk about innovation first because it’s an easier job to do. Since the Chinese New Year to now, there has been a lot of good news on the front of innovation from Chinese businesses—DeepSeek and a number of others. So, people are very impressed. I think this year, the mood of the Two Sessions is more positive because people are becoming more optimistic about Chinese enterprises’ capabilities for innovation.
In the past, Chinese firms were doing very well in innovation in business models. For example, all these internet platform companies have been doing really well, but their main innovation is their business models. But this time around, there are some innovations in some of the core technologies—in the areas of AI, etc.
So, this is very encouraging news. But still, people are hoping for more innovation.
Another question came up. In spite of this innovation, the economy is still facing a lot of challenges, and I think the top priority issue is internal demand.
Of different areas of internal demand, household consumption is the most important one listed as the top item, but it’s also the most difficult policy objective to achieve.
For Chinese local governments, they have a lot of levers to pull if they want to promote investment. They can give a lot of support to enterprises to promote investment, but there are fewer levers to pull to promote consumption. A lot of the conventional levers and policy recommendations have been taken.
For example, strengthening social security. Chinese fiscal spending on social security has been increasing rapidly. For example, this year’s fiscal subsidy for employment-based pensions is about 2.7 trillion yuan. It’s not a small number, and that number has been increasing in the past. Subsidies for health insurance have also been increasing. These are for employment-based insurance programs. Government spending on residence insurance, either health insurance or pension insurance has also been increasing.
So, some achievement has been made in terms of household consumption. Between the years of 2009 and 2015, the share of household consumption in the economy was rising. Then the rising trend stagnated. Now, it stays at around 39%.
So, a lot of the policy recommendations by experts have been implemented, but it’s not achieving further improvement. Last year, consumption as a share of GDP basically stayed the same as the year before.
What can we do? If you read the government report, you may notice this very technical item that you wouldn’t think should be there, that is, to improve the statistics of household consumption. It’s written in the work report. Why is that? That’s very much related to the effort to boost consumption.
In the Chinese economy, local governments play many roles. As I suggested earlier, they have many levers to pull to boost investment. They also have very strong incentives to promote investment.
Normally, their tenure is like three years. For those who serve longer, maybe five years. In three to five years, they need to achieve visible improvement in the economy because they are evaluated by their economic performance.
What can you do to achieve visible improvement in three years? Make investment. During the process of investment, you increase local demand. And after investment, you increase the production capability. Maybe in the longer run, these investments are not very efficient, but that’s the business of their successors. Their tenure would have been finished by the time the investment becomes a problem in the sense that supply exceeds demand.
But for household consumption, first of all, there are fewer levers to pull; secondly, they don’t have strong incentives to do that. Their tax revenue is very much tied to local production. Even though value-added tax technically is a tax on consumption, it’s collected at the point of production, not at the point of consumption.
So, local governments have very strong incentives to promote local business investment because that increases their tax revenue. There are many areas where local governments find strong incentives to promote investment.
About household consumption, we don’t even have local data on household consumption. There are some data, but these data are imperfect. For example, e-commerce consumption is accounted for, but it’s accounted for at the location of the e-business headquarters. It’s not accounted for at the destination of the consumption goods. So we have a very poor statistical system for household consumption.
We don’t have any reliable data on local household consumption. At the national level, there is very good data, but with a time lag, but at the local level, there isn’t. So this problem is there. We have been working really hard to promote the idea of making household consumption the main performance indicator of local governments, but the condition is not there because we don’t have statistics to implement that change of priority.
That’s why this time, the Government Work Report emphasises this seemingly very technical area, but I believe the implications are very profound.
There are other suggestions and plans in the Government Work Report. One of them is to promote the development of the services sector because, in household consumption, the share of service consumption has been increasing.
If you compare Chinese household consumption with the consumption patterns of more advanced economies, it’s the service consumption that’s lacking in China. So there, not enough emphasis was paid before, but now I think policymakers are realising how important this area is.
So, there are a lot of plans to promote service consumption production and supply. Hopefully, we can, by these measures, by changing the way local governments are evaluated, by putting more emphasis on the production of household services, boost internal demand in a significant way.
Henry Huiyao Wang
Thank you, Chong-En. That was an excellent summary of your key takeaways from the Two Sessions. I completely agree with you. When it comes to domestic consumption, first and foremost, we need accurate data to measure it properly. Beyond that, it should also be incorporated as a performance criterion for all levels of government—from top to bottom, across four or five administrative levels.
I think the target you highlighted is an excellent one. We are now in the final stages of the 14th Five-Year Plan and preparing to transition into the 15th Five-Year Plan, which is a major step forward. So, thank you for highlighting that.
I also noticed that, prior to the Two Sessions, President Xi met with a group of private business leaders, including Jack Ma, Wang Chuanfu, and Lei Jun, along with other top Chinese entrepreneurs. That was also a big confidence boost for the private sector.
Additionally, Professor Jin Li, as you may know, President Xi also met with representatives from the science, technology, and education communities during the Two Sessions.
I know that you are a member of the National Committee of the CPPCC, Vice President of the Southern University of Science and Technology, Director of UNESCO’s International Centre for Higher Education Innovation, and an external director for several well-known companies, including Ping An Group, TCL Group, SF Express, and Haier Venture Capital. So, you know businesses very well because you are sitting on a number of private business boards.
What are your key takeaways from the Two Sessions, Jin Li, my friend?
Jin Li, Vice President, Southern University of Science and Technology
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Thank you, Henry. Well, I would say I’m a student of Dean Bai; he’s my mentor. And John here is my senior colleague. I taught at Harvard for about 11 years before moving to Oxford to be a full professor in finance. I was trained at MIT as a financial economist.
Henry’s question, I think, resonates with me quite a bit. I actually prepared a note, but not for this question that you were asking. But that’s fine.
This is actually my eighth time to attend the meeting. I’m now in my second term. I was elected a member of the CPPCC in 2018. So, first of all, I noticed a bit of a continuity in the policy over the eight years that I’ve been in the meetings. Like Dean Bai, I’m very positively encouraged by the concrete policy proposals that are mentioned in the meeting to more aggressively reform and open up the market to boost consumption and, as Henry mentioned, to increase the confidence of private sector business people whom I interact on a daily basis, as I am also the dean of the business school in my university.
Huiyao mentioned two things that resonated with me quite a bit. One is breakthroughs in science and technology, and the other one is the protection of the private sector business and the entrepreneurial spirit in China.
You mentioned this very important meeting before the Two Sessions where the General Secretary met with a bunch of private sector business people. Some came from my part of the country, from Shenzhen, like the leader of Huawei and the leader of BYD, and also some very young people from Hangzhou, like Wang Xingxing.
I talked extensively with one member who appeared in that conference and also gave a small speech, Liu Yonghao. Mr. Liu is the chairman of the New Hope Group 新希望集团. He is in the same small group of the CPPCC as I am. He said that all the people attending the meeting received this very strong positive signal that China is going to embrace entrepreneurship, embrace the private sector business, and also encourage more scientific breakthroughs that Dean Bai also was mentioning, and use it as the means to develop the new quality productive forces to enhance the quality of economic growth in China.
I think many of the observers of the Chinese economy would probably think that China has done a good job so far in encouraging science and technological breakthroughs. That’s also my opinion. I taught at Harvard for more than a decade, then at Oxford for a while, and then at Peking University for about 10 years before moving to my current university. So, I think I’m qualified to make an international comparison.
Just before the Two Sessions, I went back to Boston because my family is still in Boston, and I visited a bunch of my former colleagues in France who are still employed by Harvard or MIT. A lot of these people are worried that there’s going to be a cut in the expenditures on basic scientific research.
In China, I think the percentage spent on these basic or foundational research has been steadily increasing over time, exemplifying the government’s determinance to really, really boost the level of breakthrough research because that’s going to spill over to all sectors of China, allowing more breakthroughs by proactive forces like the ones that I mentioned—Huawei, DJI, BYD, Tencent or TCL.
As Henry was just mentioning, I’m fortunate to be friends with many of these firms’ leaders, and I sit on some of the boards of these companies. Once I go back to Shenzhen, I will definitely have more discussions with them. But my early conversation with them indicates that they are all very encouraged by these positive signals sent through these Two Sessions’ meetings that the central government is going to keep boosting research against the tide of almost retraction from some other parts of the world.
And we’re going to also hope to attract more talents—people of my ranks, seniors who have already been at the level of full professor at least in top universities around the world, to come back to China to serve the Chinese economy.
I think with these measures, along with the measures to boost domestic consumption that Dean Bai was talking about quite a bit, combined, I’m very confident that the Chinese economy is on the trajectory of stabilising and achieving more and more good outcomes in the years to come.
I also want to mention the 5% target that the government set. I heard quite a bit of my friends, especially from outside of China, saying, well, that’s going to be quite a stretch. I personally think it’s achievable but with a lot of work.
I think it’s going to be harder than last year. Last year, after a lot of work, we achieved 5% growth. This year, we are facing more international turbulence with more uncertainties.
Also, at the same time, the base has been higher. You know, we have already been a stronger and bigger economy. Each year, 5% growth, that’s almost like the overall GDP of a mid-sized economy. With these challenges, it’s going to be harder.
But, I think with all the measures that are mentioned during the Two Sessions meetings, I’m very confident that in the end, we will see a very good outcome in achieving these goals.
So, let me stop here.
Henry Huiyao Wang
Thank you, Li. Excellent. You talked about the business sector, science and technology, talent return and things like that.
I think DeepSeek is ushering in a second wave of talent returning to China to start AI businesses. In the U.S., 30–40% of AI talent comes from China, and with the recent success stories, I’m sure we will see even more entrepreneurial opportunities.
For example, in Hangzhou, with six AI companies setting up operations, a recent real estate auction exceeded the bidding price, which is a positive sign for the market. So, thank you for sharing your sharing on that.
Now that we’ve heard from our two CPPCC members, I’d like to turn to our NPC delegate to get a broader summary of the conference.
Professor Tian Xuan is a delegate to the 14th National People’s Congress and the Dean of the National Institute of Financial Research at Tsinghua University. I also know that you are a Changjiang Scholar, a distinguished professor, and a member of the 9th Expert Advisory Committee of the Management Science Department at the National Science Foundation of China.
So, Professor Tian, as an NPC delegate, what are your takeaways from the conference from a delegate’s perspective?
Tian Xuan, Associate Dean of the PBC School of Finance, Tsinghua University
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Thanks, Huiyao. I think my major takeaway is that I am encouraged.
As Dean Bai and President Jin said, we have set a very ambitious target. The GDP growth target is set at around 5%, the same as in the past two years. However, we have a much larger economic volume now, so achieving another 5% increase will certainly be very challenging, but I believe it is achievable.
As we have already observed in the Government Work Report, Premier Li Qiang announced several key policies, particularly on the fiscal front—called “a more proactive fiscal policy.” The deficit ratio has been raised to around 4%, which exceeds the invisible red line of 3%—as many of you may know, there is an invisible red line in China’s deficit ratio, with the exception of 2020, when the global pandemic occurred.
So this year, we increased the deficit by 1.6 trillion yuan, and we are going to issue another ultra-long special treasury bond of 1.3 trillion yuan, long-term treasury bond of 0.5 trillion yuan, and local government special bonds of 4.4 trillion. The total government debt is going to be 11.86 trillion yuan, which is 2.9 trillion yuan higher than last year. So, we have a very strong fiscal policy. In other words, the government is going to increase their leverage, especially the central government. We are going to increase the government spending to support the “two major projects”—major national strategies and security capacity-building in key sectors—and the large-scale equipment upgrades and trade-in of consumer goods.
In terms of monetary policy, we are going to have a so-called “moderately loose monetary policy,” which, in my understanding, is going to be a more aggressive monetary policy, later to be announced later by the People’s Bank of China. In other words, my expectation is that we are going to have another, maybe, interest rate reduction by 50 basis points, and a reduction of the reserve ratio of around 80 to 100 basis points, something like that, to provide more liquidity to the stock market and reduce the financial cost of households and companies.
These are very strong, very powerful policies to help us achieve the 5% economic growth. So, I’m very encouraged.
Some other things I would like to say is, by reading this year’s Government Work Report, I observed some new expressions. I have a cheat sheet here. Let me tell you, it’s very interesting.
For example, they say “invest in people” instead of “invest in things” in the past years. It’s the very first time that Premier Li Qiang mentioned in his Government Work Report that we are going to invest in people. My understanding is that the meaning of investing in people is twofold. One, we are going to invest in improving people’s livelihoods and make people have higher standards of living by improving healthcare, social security, housing, and education, and enhancing the employment rate.
The other meaning is to invest in human capital. In the era of AI, as in the last three technological revolutions, a lot of jobs are going to be destroyed and replaced, but new positions are also going to be created. So, I guess investing in people means we are going to enhance our human capital under the new age of AI.
The second new expression is when the Premier talked about the policy implications, he said, “Policies should be introduced and implemented as soon as possible—it is better to act early than late,” which means we are going to have the policies and solutions ready before the problems come up.
He also said, “Once we are certain of a policy, we should decisively act with ample force to produce more effective outcomes.” In other words, we are not going to gradually announce policies as we did before; we are going to have some policies which are not expected by the markets.
The third new expression is to address involutionary competition, which is a new word in China. I don’t know if you have an idea of involutionary competition. I think there are two layers. One is involutionary competition among governance. The other is among companies.
We are going to avoid bad equilibrium in the sense that everybody tries to reduce their prices and everybody has a very low profit margin. That’s a bad equilibrium. We are going to do something to address this involutionary competition.
The last thing is we are going to build good houses. Good houses mean safe, comfortable, green, and smart houses. This is also a new expression in this year’s Government Work Report. I guess good houses are not only to provide comfortable, safe places for people to live, they also need to be green to save energy and smart with the technological innovation of AI.
The last thing I would like to mention is the private sector. Actually, Dean Bai and President Li mentioned it a little bit. This year, I observed there is almost a whole paragraph in the Government Work Report addressing the private sector to encourage entrepreneurs to have confidence in financial market access and financial credit access. We need to have equal opportunities for both SOEs and the non-SOEs. We are going to provide more legal protections to these private sector entrepreneurs, and we are also going to develop the rule of the law.
Another thing I observed is to build a better government relationship between the government and the market. In other words, the government is going to transform from market participants to rule maintainers.
This year, during the Spring Festival holidays, DeepSeek surged, and all major cities in China asked themselves, why did DeepSeek happen in Hangzhou? Why not in Shenzhen, Nanjing, Beijing or something like that? I guess one of the main reasons is the services provided by the Hangzhou government. Their basic idea is to not bother if nothing important happens, but be responsive to requests from these private sector enterprises.
So, that’s pretty much what I would like to say.
Henry Huiyao Wang
Thank you, Professor Tian. Absolutely. You’ve introduced a lot of new terms, key jargon, and policy interpretations from these very meaningful conferences.
I think you made an excellent point about comfortable housing—that is really what we need to do to become greener and cleaner. That’s just one of many impressive policy directions we’ve seen.
Of course, while domestic policies are being set in motion, we are also facing a turbulent international situation. For instance, President Trump has now been in office for almost 50 days, with about 15 to 20 days left before a decision is made on TikTok. Also, tariff disputes and trade tensions continue—not just with China, but globally.
So, I’d like to turn to Professor John Quelch. You are the Executive Vice Chancellor and John deButts Professor of the Practice at Duke Kunshan University. You also wrote a book called How Good Marketing Makes for Better Democracy many years ago. You’ve also taught at Harvard and the China Europe International Business School, so you are very savvy in global trade and its impact on China.
As an American yourself, I’d love to hear your insights on what these trade tensions mean for U.S.-China relations. That would be very interesting to hear.
John Quelch, Executive Vice Chancellor and John deButts Professor of the Practice, Duke Kunshan University
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Thank you very much, Henry. I appreciate the invitation from CCG to be a member of this esteemed panel.
As the only American, I think, in the room, I’m relieved that the Ambassador for Denmark is not here. Since President Trump reasserted his claim overnight with the help of the Secretary-General of NATO, no less, by his side, trying to draw him into the fray.
So, I think I might just spend a minute trying to not apologize for or explain, but try to give you some insight into why President Trump thinks this strategy is a good strategy.
Number one, the United States’ international trade as a percentage of GDP is low. It’s only about 25% of GDP. China, a huge country as well, international trade is 35% of GDP. For most of you in the room, especially from Europe, international trade is 80%, 90% of GDP, sometimes even 100% or more.
So, President Trump feels the United States economy is relatively self-sufficient and believes that if there’s an all-out trade war—it doesn’t really matter if it’s a zero-sum game, it doesn’t matter if global prosperity is hurt—the United States, if there’s a global recession, is gonna come out relatively better than anyone else.
The second key point is that with respect to the trade deficit with China—it is, of course, a very, very large deficit still, even though the percentage of international trade of China with the U.S. and the U.S. with China has gone down a little bit in recent years as a result of some efforts at decoupling.
And by the way, that’s not such a bad thing for the overall balance in the global economy for there not to be this very, very heavy mutual dependency of two large countries. It would be nice if international trade was spread around a little bit more.
But, given the very large deficit that the U.S. runs with China, the belief of President Trump is that he can out-tariff China. In other words, he can inflict more pain on China than China can inflict on him.
A final point I would make is you might think that after Trump 1.0, they would have learned their lesson that tariff war doesn’t really work. Instead of learning that lesson, the lesson they learned was we didn’t inflict enough pain; we didn’t push it hard enough.
And so, brace yourselves because I don’t think it’s over. Unless something really untoward happens, for these reasons, I believe the U.S. is going all out to reset the equation with China, and that’s the fundamental purpose of this whole thing.
Canada and Mexico, that’s kind of a warmup. That’s just getting things warmed up and making Trump tariffs an equal-opportunity employer, if you like. So, I would say there’s a lot that’s gonna happen vis-a-vis the U.S. and China still to come. I hope not, I hope I’m wrong, but I’m just giving you my impression from a U.S. point of view.
Now, very briefly, what could China do? What has China done? Of course, many Chinese companies loaded up inventory into the U.S. ahead of the tariff war. In many industries, there’s six months’ worth of supply in warehouses already shipped into the United States.
As we’ve already heard, China can double down on domestic consumption. China has been, since Trump 1.0, making great outreach to the Global South. Pretty much every week, President Xi Jinping receives one of your heads of state and a nice picture appears on the front page of China Daily.
It would take the head of state of most of the countries in this room a tremendous amount of effort to get an audience in the White House. At the moment, you just might get to see the deputy assistant undersecretary, if you’re lucky. But China is understanding that and reaching out very intelligently across the board, any country, large or small, doesn’t matter.
So, that Global South outreach is very important. But the final thing I’ll say is, in a recession or in a difficult time, doubling down on innovation is the absolute way to go. If you have the capital available, you double down on innovation when times are tough. When everybody else is short of capital, they’re running for the exits, they’re too scared, they’re not willing to take the risk, that’s the time to take the risk. And so what we see regarding innovation, I think, is a very important message coming out of the Two Sessions.
Henry Huiyao Wang
Thank you, John, for those sober suggestions. Absolutely. I mean, now you see a doubling down on innovation. That’s exactly what China is doing, for example, with DeepSeek and many more.
At the same time, global trade dynamics are shifting. The U.S. now accounts for about 10% of China’s trade, while China’s trade with Belt and Road countries and the Global South has grown to around 70%, in addition to its trade with G7 nations.
So, if the U.S. chooses to wage a war against everybody, the rest of the world—including China—will naturally trade more among themselves. This is likely the direction things will continue to move in. I think you’re absolutely right—we have to be prepared for further turbulence in the global landscape after the Two Sessions.
Now, last but not least, I’d like to invite Dr. Tang Ming. He’s Vice President of CCG, a former Counsellor of China’s State Council, former Deputy Secretary-General of the China Development Research Foundation, and a former Senior Economist at the Asian Development Bank.
So, Dr. Tang, what’s your take? I know you’ve been involved in AI, rural innovation, and many other things. We’d like to hear from you as our last speaker.
Tang Min, former Deputy Secretary-General of the China Development Research Foundation (CDRF)
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I was told I was given the most easy assignment and most difficult assignment because you asked me to discuss agricultural, rural, and farmers’ issues.
That’s easy because, in economic terms, this whole thing’s only 7% of GDP. It’s not much, right? But it’s also the most difficult issue because the rural population remains relatively poo. Although agriculture only produces 7% of GDP, we do have more than 35% of the population in there. So this is a difficult area. That’s why the government has always placed much attention to agricultural, rural, and farmers’ issues.
Now, the performance last year was not that bad. Agriculture growth was 3.5%, lower than the 5% GDP growth. But the average income of the rural population grew by 6.8%, higher than people in urban areas. Why is it that when agriculture grew by only 3.5%, rural incomes grew at nearly double the rate?
Because in the rural area, around 60% of income actually does not really come from the agricultural sector. They’re working in the local industries or they’re working as rural migrants and send money back. But anyway, rural income grew a little bit higher, about 1% higher than urban income last year.
Now, what are the new policies to address this most difficult and most important area in China? In my view, there are mainly two things.
Number one, we will continue to promote food security. That means we have to produce more grains. Why? Because China still imports a lot of grains. It’s quite a big percentage. And we know the international environment is still quite disturbed. The Chinese government always worry if we do not have enough food—in Chinese history, we did have many years of starvation—and if we depend too much on the world market and import a larger proportion of grains.
This year, we will further increase grain production. So far, the average grain supply per person in China is about 500 kilos, which is okay but still only about half of that in the United States and even lower than in Brazil. But China has a large population, and we want to increase it a little more, because, as you know, grain production depends too much on weather, fertilisers, and other factors.
But how does the Chinese government promote this? Number one is what we call the high-quality agricultural farmlands, which the government pays money to build. We have a lot of farmlands which may not be in a good situation. So the government gives money to upgrade the farmlands—make small pieces bigger and uneven land level.
Second, China still has the potential to produce more grain, but farmers have little incentive to put their efforts there. Why? Because grain prices are too low. Farmers work all year but earn very little from agricultural production. That’s why 60% of their income has to come from outside of a farm.
Why are prices so low? Because grain prices in China are closely tied to international prices. The global market is more productive, and China has less farmland per capita. Competition drives prices down, and that’s why grain prices are low and farmers do not get much income from grain production.
So this year, we introduced a new idea. This policy is called the “inter-provincial mechanism for major grain-purchasing areas to compensate major grain-producing areas.”
For example, coastal provinces like Guangdong and Zhejiang produce some grain, but not much, so they import a lot. Meanwhile, agricultural regions like Henan and the Northeast—such as Jilin—produce lots of grain to ensure national food security but do not get much income.
The government did have some subsidies before, but because of WHO rules and financial constraints, they do not have much money to subsidise that.
So what happened? We created that new idea, say like, let those provinces that consume more grain than they produce pay. That means they have to import from abroad and from Henan, from all the grain production areas, and they should subsidise all that. So, this is called the inter-provincial mechanism.
Last year, they tried in one county in Henan, and it significantly increased incentives. That county’s production increased by more than 10%, and farmers’ incomes increased by 15%. So this year, we will enlarge this new mechanism.
So, this is one thing, producing more for food security. And second, which is also important, is how to achieve faster growth of farmers’ income because we still have 450 million population in rural areas.
How can we increase their income? Again, we need to create more jobs. One key factor is the migration of rural workers to urban areas. Every year, about 12 to 13 million people move from rural to urban areas and find a job, and they’re getting more income for that. So that creates more job opportunities, though we know how difficult it is to create job opportunities.
Surprisingly, high-end jobs—for example, those requiring a college degree—are harder to find. But for the low-end job, nowadays, it’s not that difficult. Actually, we do have a small labour shortage. If you go to a restaurant, you’ll always see “help wanted” signs, because low-end job opportunities are still readily available.
Beyond increasing job opportunities, we also increase pensions—though the increase in rural pensions is not much. This is because rural areas have an aging issue, as most young people have moved out to urban areas. Rural populations are largely made up of people in their 50s, 60s, 70s, and even 80s. So, we have to increase the pension system.
The increase will not be much. Nationwide, the central government will provide an additional $3 per month—about 20 yuan. It may not seem like much, but provincial, municipal, and county governments also have to pay for some of them. Many times, the local government pay more for the pension increases than the central government.
But anyway, that’s just one of the measures. There are many other measures to promote faster economic growth.
Hopefully, this year, agricultural production can at least be maintained—if there are no major weather disasters—and with some little more government policies.
Secondly, rural income can hopefully continue growing a little bit faster than urban income, though the income gap is quite significant. Currently, the average urban income is 2.3 times higher than the average rural income. In countries like the United States and Australia, the ratio is nearly 1:1 because they have a different type of farmers. In China, the gap is 2.3, which is still a bit lower than Brazil’s. Brazil is around 3.
Ten years ago, China’s rural-urban income gap was around 2.8 to 2.9. Now, it’s already reduced to 2.4 or 2.3. If rural income keeps growing faster than urban income, the gap will gradually reduce. But it’s quite slow, and we still need the next one or two decades to bridge this gap. But at least we saw this improvement. Thank you.
Q&A
Roland Reiland, Ambassador of Luxembourg to China
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First of all, thank you very much, Henry and Mabel, for bringing us together again in this very insightful discussion round. And thank you, distinguished scholars, for your evaluation. Maybe two questions, if you like. I was taken a little bit by surprise, Henry, but nonetheless.
Obviously, as you may know, household consumption is a major interest where we are looking at. You explained to us very interestingly, and I fully agree with your analysis, that the levers to boost household consumption are not very many, and it’s very difficult. And you referred to some of them.
So, my question would be, in addition to that, particularly for structural levers to boost household consumption, which one would you, as a scholar, still see?
Because I think what we see in there is, and I don’t know if you agree with me, but at least this is my analysis that I sent back to headquarters, that we see a start of a timid use of structural levers in boosting household consumption, which I think is a very positive sign. But it’s a beginning.
And my question would be, what could be additional levers to continue that and to add on top of that?
Then if you may allow another issue, which I think is important to us as envoys of, in particular, European countries. Obviously, we look at trade surpluses, in particular with the European Union, with some worrying signs. And I think the figures do not tell us everything.
There is the Chairman of the European Union Chamber of Commerce in China, who is, by chance, the boss of Maersk, a container company in China. So he knows a lot about container trade. He uses another metric, which is looking at the amount of container trade between [China and the EU]. And it seems that there, the relation went up from 2023 to 2024, if my memory is correct, from one point two to five, meaning that the surplus on the Chinese side is getting bigger and bigger.
So what would be your response to that particular worry of ours, obviously with regard to those figures? Thank you very much.
Bai Chong-En
Thank you very much for those questions. I was hoping that somebody will raise those questions so that I can elaborate more.
As I said earlier, and you also referenced them, some of the traditional levers have already been used. I would suggest a few other areas.
First of all, more spending on primary education. Right now, we provide free education from the first grade to the ninth grade, from age 6 to age 15. That period of education is provided for by public finance. But preschool education is still not fully covered and the burden on young households with kids going to kindergarten is still very heavy. The cost of sending one child to kindergarten is about 10% of household disposable income. It’s not a small number. So, if the government can take care of that, that would be a big relief to households.
For daycare, the enrolment rate is very low—around 6%. The world average is around 35%. One of the reasons is that it’s very expensive. it’s even more expensive than kindergartens—it’s 17% of household disposable income. So, if the government can provide more support there, that will be again another big relief for young households and the quality of daycare. People are not sending their children to daycare not only because the the financial burden but also because they don’t feel comfortable—they are worried about the quality. There, I think the government can do more to have better regulations and better standards for daycare. So those two things together.
With it an estimate, we only need to spend 0.32% of the GDP to provide free kindergarten education, giving each child a 10,000 yuan annual subsidy for daycare. That will help to raise the 6% enrollment rate, hopefully, to 30%. I think those measures will be very helpful.
In the Government Work Report, it’s written that we will gradually Increase spending on preschool education. So I think that’s a very important part.
As for insurance, yes, the government’s fiscal spending on social security has already been increasing a lot. But for residents’ social security, the level is still very low. I think the quality is already quite good for the employment-based system, but not for residents, which is about 50% of the population and who don’t enrol in the employment-based system.
We have two separate systems: one for residents and the other for employed people. So, more spending on social insurance for residents will be another area where we can boost consumption.
Also, this may sound counter-intuitive. I said that there are many levers to pull to support investment. Sometimes the local governments are doing the right thing, supporting innovation; other times, they sort of provide too strong an incentive for investment so that you create surplus production capability. If the government can do more to support innovation but do less to increase excess supply, that will be very good for the local economy and the world economy as well. Then the government can save some money to divert that use of funds to support education and health—investment in people, that’s what’s mentioned. So, I think those things are very important.
You talked about the trade figures, especially the imbalance between container movements. That’s about the trade in merchandise, in manufactured goods. In manufactured goods, China’s trade surplus is about 9% of GDP. It’s very large. But we run a large deficit in services trade and in the trade of raw materials.
So, if you add the surplus in the manufacturing sector with the deficit in the services and raw material sector, then the overall trade surplus is around 2% of GDP. It’s not an extraordinary number. It’s actually a mild number. In 2007, that number used to be 9% of GDP. It has dropped to 2% now. So I think, in terms of overall trade balance, China has made a lot of efforts. But in manufacturing, the trade surplus is still large.
Actually, the Government Work Report calls for the local governments to be more prudent in their effort to attract investment, hoping that local governments will not put fuel on the fire in terms of creating more excess capacity. I think that that will be very good for everybody.
Djauhari Oratmangunm, Ambassodor of Indonesia to China
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Henry, thank you very much. Mabel, thank you very much as well for Inviting me to come here.
I have a few questions. Number one, if you look at last year’s Chinese economy, you were able to increase by 5.3% with some new policies in the fourth quarter last year, compared to the first, second, and third quarters. That makes your average rate of growth last year 5%.
My question is: what were those new policies during the fourth quarter? Now with new policies coming out from the Two Session, will they increase the growth for 2025 as well? I saw some of the market reaction reactions in Hong Kong, Shenzhen, and Shanghai, and it’s quite positive—at least a 1% to 2.3% rise in the market reaction to the policies coming out from the Two Sessions.
I [inaudible] as well even though I already made a report on innovation and domestic consumption. But this is the interesting thing: how to accelerate the rural income to much higher than urban income with the two strategies. Can you elaborate much further on that because somehow this is the policy of my new government as well? That’s why I want to know further about this policy. This is new for me.
Irit Ben-Abba, Ambasador of Israel to China
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I think it’s a question I’d like to direct to Professor Jin: unemployment in China.
We see that the figures are already relatively high now. And with the acceleration of the integration of AI technology and innovative technologies into the economy, you will be able to employ fewer people. On the other hand, there’s this trade issue that has come up. Overcapacity of production in China will have to decline, so people will have to be laid off from their work.
What is the solution to unemployment in China?
Pradeep Kumar Rawat, Ambassador of India to China
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Just one very simple question. I’m not a financial person. The general conventional wisdom is that when you are young you take on more debt, as you grow old you take out debt.
Now, China is growing old—like we talked about the silver economy. Is it a good strategy to increase debt as Professor Tang mentioned, that this year, China is going to take more debt? Is it a good strategy?
Massimo Ambrosetti, Ambassador of Italy to China
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Thank you very much for this very interesting conversation. I have a question on trade surplus.
I think it will not change. I feel that this is, frankly speaking, one of the priorities for the Chinese government. I mean, for all the all the indicators that we know, manufactured goods from China will continue to be very competitive because, of course, you have deflationary trends, compared to the Inflationary trends that we have in in Western countries. And for a set of other reasons, I think your goods will continue to be very competitive in the next economic scenario.
But this is not just about economic interaction, it is about overall strategic interaction and also finding a new consensus to grow together. This year, as you know, is, for instance, the 50th anniversary of the partnership with the European Union. The European Union has a very significant trade imbalance with China. This is the same for my country, for instance.
So, how do you think to make it sustainable for the longer term? Because it’s not just a problem of economic policy or management. This is also a political problem in a very tense and challenging strategic scenario.
Tian Xuan
You asked me a question that when people are young, they take more debt; when they become older, they sort of take off the debt. My answer is very simple: China is still young. We are still a very large developing country, and our economic growth rate—like last year, we had 5%—is still very high. It’s not as high as what we had a couple of years or 20 years ago, but still, we are a developing country.
We take more debt to jumpstart our economy. The central government takes more leverage to increase their spending to stimulate the private sector and encourage them to increase their investment which creates more jobs. And then more people can get employed, their income increases, and they increase their consumption, which addresses the insufficient domestic demand issue. Then we have a positive loop, which can make the Chinese economy have stable growth.
Last year, I had a lot of discussions with other economists. We even had discussions with top decision-makers. All our suggestions were pretty much to encourage the central government to take more debt and increase their spending to help the companies. So far, our economy is a little bit cool. That’s a fact. So, we need someone—the central government, ideally—to take the initiative to jumpstart the economy.
So, I don’t think we have too much debt. I think, on the contrary, we should have more debt. As long as the deficit ratio is lower than the GDP growth rate, we are pretty much safe. We are not running a lot of deficit risks.
Tang Min
Let me explain more about how to promote rural income growth.
As I mentioned, number one, the government should put money into upgrading some of the farmlands. This means improving farmland quality, enhancing irrigation systems, or whatever. Then your production will increase, and the government pays for the upgrade. So, this is number one.
Number two is even if your production increased, if prices drop, farmers may not necessarily get more income. So secondly, we should try to increase the procurement price of farm products. But how can you do that? You cannot force the market to increase prices.
So what the government is trying, as I mentioned, is the “inter-provincial mechanism.” This means that provinces that cannot produce enough grain to feed their own people—those with a supply gap—must import grain from major grain-producing provinces and pay subsidies to them.
This is the second measure. As I mentioned earlier, they already tried it last year in small counties, which was quite successful. Now, it is being expanded.
The third measure is, as I mentioned, to increase the pension.
Fourth, there are many small measures. For example, in rural areas, a lot of people—maybe more than 50% of the rural population—are aged 60 or 70 years old. They are very old. They cannot really do hard labour, so they often rent out their land to those capable of large-scale farming.
However, when farmers rent out their land individually, they lack market power and end up getting very low rental income. China does not allow the sale of farmlands, but it can be leased for three, four, or five years. The problem is that individual farmers in rural areas have little bargaining power with big companies.
So, the government encourages villages to negotiate collectively. The whole village—or even multiple villages—can put their land together. You want to rent out? Okay, then let the village negotiate with the companies. This approach can sometimes double rental prices or increase them by 50%.
Of course, most importantly, you have to create urban jobs because if 60% of rural income comes from non-agricultural productions, that means you have to also address this 60% by creating more jobs and letting the rural income grow faster.
Some of the policies need several years to show effects. Some have results immediately. Hopefully, next year, there will be some improvements, but a dramatic change is not easy.
Henry Huiyao Wang
Actually, Tang Min, I could add one policy.
We have 300 million migrant workers living in cities. They have household land in rural areas—land that is often left unused, turning into green grass. Currently, they can only rent it out, but if the government were to allow these lands to be auctioned or sold, they could use that money as start-up capital to buy second-hand apartments in cities. And urban residents can go down to the rural area to buy the household land. That will probably usher in another boom for China.
Anyway, John, I think there are some trade questions for you, too.
John Quelch
Trade deficits are pretty much irrelevant to the economic health of individual nations or global prosperity. It’s unfortunate, therefore, that trade relations are being leveraged in this way, though perhaps they’re being leveraged in this way precisely because they’re really not that relevant to prosperity. What’s much more important to prosperity is national productivity, innovation capacity, and talent development, etc.
Let me just say one more thing because we’re running out of time: on the U.S.-China relationship. In my opinion, there is a crisis of confidence in both countries. The United States needs to be more confident that it can compete with China with one hand tied behind its back. And China needs to be more confident that it can compete with the United States on a more level playing field than it’s been operating on for the last 20 years. If those two changes were to occur in the psyches of these two nations, [they would] get along much better.
Jin Li
I’ll just first address the question by the lady there. I think the unemployment rate is going to be a big problem for China going forward, especially for university and college graduates. It’s a matter that draws a lot of attention. I’m an educator and I worry about young kids’ job prospects.
Fortunately, my university is doing fine, but generally, I think there is a problem. Well, there are at least two problems. One is the structural one. Our education system is not producing the talents that enterprises actually need. So there is a big mismatch and it calls for reforms.
Henry mentioned that the education system should be more aligned with the demands of the enterprises. Also, scientific breakthroughs are going to cause a lot of changes to the structure of the new type of talent that society needs.
That I think is both posing a challenge but also an opportunity because we can take advantage of the development in technologies like AI to better reform and redesign our education system, again, to make it fit the needs of the people.
Along that line, I also want to mention something that’s related to some of the other questions that I heard here. China needs to really find a better balance for its own input and output. It’s producing a lot of goods, particularly in the manufacturing sector. We talked about overcapacity in some of the sectors. It’s not only affecting China’s own economic balance but also the global trade.
Part of that, I think China is not used yet to its own economic status. From the outside world, we always think of China, oh, you’re already the second-largest economy. But from inside, internally, we always think of ourselves as a developing country. As Professor Tian Xuan was just talking about, we’re still growing; we’re adolescent, we’re not grown up yet; we’re 5% growth each year.
If you look at per capita, we’re just a fraction of the standards that most of you are used to. So, give us some time, but we should understand why the outside world is more concerned about the way China is exerting more influence than it expected in the past.
Therefore, it should adjust its own expectations of how the world thinks about China. I would say adjust its own production capacity and balance its economic activities—better balance the demand and the supply domestically.
In other words, China is now a big economy. It’s a quickly growing economy. So, it has the capacity to balance its own domestic economy and, therefore, exert less of a—I would say disruption is a strong word—imbalance to the rest of the world.
Maybe I should say China is grown up, so it should think of itself as a grown-up. But I would say also that these kinds of adjustments should be moderate, slow, or else it’s going to cause a huge amount of repercussions to everybody, including China itself and the rest of the world.
Just take Europe, for example. We talked about the trade surplus, and as Dean Bai was mentioning, if you take together the goods and the services, the overall balance has been radically reduced over the last 10 years or so. But if it’s more radical, I fear that not only is it going to cause more employment problems for China, but also it’s going to cause inflation problems for many other trading partners.
So, I think, allow some time for China to adjust. It’s moving in the right direction, in my opinion. China is behaving more like the rest of our developed world. So, I’m very hopeful, optimistic about the future. I’ll stop here.
Bai Chong-En
It seems that all the questions have been answered, but still, I would like to elaborate a little bit.
Very much like what Professor Jin emphasised, there should be more balance in the Chinese economy. That will help create a lot of employment. I will just give you one example.
In China, there is only one nurse for every doctor. Worldwide, it’s one doctor, four nurses. There are structural reasons why it’s the case in China, because hospitals are sort of public entities, so there are very tight regulations on employment in public hospitals. If we reach the target of one doctor, four nurses, that will be immediately 15 million jobs.
There is overcapacity in some of the manufacturing sectors. There is huge undercapacity in many of the service sectors. So, there are ample opportunities for employment creation just in the right area. That’s just one example there.
About debt, that’s a very good question, and in the long run, we should be very careful about the debt. But in the short run, the economy was in a slump, and we need to do some stimulus to boost the economy so that it comes back to the normal track. So, in the short run, boosting debt is not a bad idea.
Also, in the numbers, a lot of it is replacing old debt with new debt. Local government borrowed from many different sources. They owe their suppliers, for example. Now the central government allows them to issue more bonds so that they can pay back the debt they owe to the vendors. It’s not increasing debt. Rather, it’s changing the structure of debt in a better way. So, that’s my take on debt.
About trade, there is this tendency of viewing trade as zero-sum. I don’t think it is. If people are trading, it must be that they mutually benefit one another.
Let me give you one example, Europe. Energy cost is a drag on the competitiveness of European economies. Can China, Europe, and Africa work together to not only make energy supply greener but also more efficient and cheaper? I believe there is a way. If the three parties come together and build solar power farms in Africa and use power in Africa to smooth the electricity supply and sell it to Europe, it will make the world greener. It will help Africa develop. It will reduce the cost of energy in Europe. It will give Chinese suppliers a market.
I don’t think it’s a zero-sum game. It’s a huge positive-sum game, except that people say, well, that will make Europe more reliant on China for its energy supply. It’s not secure. But I don’t think it makes a lot of sense. Once the solar electricity farm is built, China has no control over it. There is no security issue. It’s not like the supply of gas. When you cut off the supply of gas, your storage doesn’t last very long. But solar batteries last for 30 years. So once it’s installed, it’s already there. There is no security issue.
So there is all this mongering about making us less reliant on the Chinese economy to be more secure. It should be more carefully considered.
Henry Huiyao Wang
Great point. Actually, I echo what Dean Bai was saying.
I will have another word on a topic that we didn’t talk about: offshore business. This was mentioned for the first time during the Two Sessions, referring to the growing trend of Chinese companies going global ahead of schedule, setting up factories, exporting, and importing in different countries—forced by tariffs or trade wars.
It is also a positive development because it provides employment and generates income in local communities. At the same time, Chinese businesses also benefit. However, the scale of this offshore business is not yet fully accounted for in official statistics.
And I think you are right. Having this solar farm in Africa and helping Europe could be the way to go. I think this is really important.
We’ve talked about a lot of ideas today. We analysed the Two Sessions, interpreted the latest policy thinking of China, and heard insights from five top experts. It has been really productive.
We have nearly 20 ambassadors and representatives from over 30 countries, as well as delegates from international organisations, media, and various government offices. It’s truly a pleasure for CCG to host this debriefing and policy analysis at the beginning of the year. We will also put it on our website so that more audiences can benefit from it.
On that note, I’d like to conclude today’s luncheon. Our panellists probably haven’t had much time to eat. But let’s take a group photo to memorize this distinguished panel, our esteemed ambassadors, and all the participants. So let’s take a photo, and then we will continue with coffee, tea, and whatever. Thank you, everyone. And let’s give a big round of applause to our panellists!
Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.
