Every year, at the end of Q1, the Chinese government publishes its Government Work Report, which is, in essence, the national work plan for the coming year. Like many other enthusiastic and interested parties, investors and business executives worldwide look forward to the document’s unveiling, as it indicates the policies, targets, and priorities set by the Chinese government for the year ahead. Having a firm grip on these policies is crucial for international companies doing business in China.
Last year, China’s 14th 5-Year-Plan announcements provoked fervent discussions among the business communities it directly impacts. However, this year, the Government Work Report doesn’t point to fundamental policy changes (as it did last year), and therefore, it probably hasn’t triggered significant coverage. That being said, we always make sure to keep up-to-date with China’s current agenda and analyze the business and financial opportunities it offers, in order to optimize strategies where needed.
This post presents China’s Government Work Report’s key takeaways for international companies and investors interested in the Chinese market.
Stability is key – no major regulatory changes are predicted
Against the background of the slowdown in economic growth, the Russia-Ukraine war, the Covid-19 crisis, and the international pressure on China, the main focus this year is on maintaining stability. For this reason, the government does not plan to make significant moves or promote any new ambitious policies that the general public have not been made aware of.
Government growth drivers
In order to meet the GDP growth rate target set for this year (5.5%), the government is going to take measures in multiple areas.
Fiscal policy – The government plans to increase its spending by more than two trillion RMB compared with the previous year. This vast injection will be invested in special infrastructure projects including water conservation, energy facilities, pipeline networks, flood control, drainage facilities, 5G, data centers, electric vehicles infrastructure, etc.
Tax policy – The government tax policy includes financial support for businesses, mostly SMEs, within sectors that have been impacted by the pandemic as well as other high-priority sectors (as recognized by Beijing). The government is dedicating 2.5 trillion RMB to this tax relief program. Read more on the applicable tax benefits for small businesses in China in 2022.
The government proclaimed it was planning to expand the market liberalization for foreign investors and broaden the list of “encouraged industries” – industrial fields or services accessible to international companies and offering governmental benefits and incentives that support this pledge.
Best benefiting sectors
Considering the sectors outlined in the Government Work Report, we’ve spotted five sectors that appear most interesting in China’s eye:
- Advanced manufacturing
- Information and communications technology (ICT)
- Financial services
- Healthcare & Medical devices
- Sustainability & Greentech
The number of mentions of each of these industries indicates the importance the government attaches to them, and therefore, their potential to benefit from government support programs during 2022.
Moving forward – any policy is an opportunity
China’s plan of action, as was published in the report, is expected to affect all international companies doing business in China. And as is usually the case in China, the national directives will seep down to provincial and local governments, and serve as a “compass” that guides local policymakers.
Generally speaking, any government policy is an opportunity that international businesses should strive to take. And they can do so, so long as they are aligned with the government’s definition and conditions. Now, as the government work plan is out and the national priorities are known and established, businesses and investors can bear them in mind when finalizing their strategies for the Chinese market.
The Chinese market is boiling, in 2021 PTL Group engaged with an unprecedented number of new clients in the company’s 22 years of operation. This is to demonstrate that even in times that look less promising – and even during a global pandemic – there is still a door open to enter the Chinese market and grow in it.
