China has wrapped up its two big annual meetings, the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). The first is the country's parliament, while the second is the top political advisory body. While the NPC is routinely dismissed as "a ceremonial legislature," the meetings provide valuable insight into the thinking of the country's top leadership. This year's meetings sent two important messages. First, China is bracing for economic troubles. And second, as a result, there is a growing need for political discipline and control.
The NPC includes nearly 3,000 legislators, Chinese Communist Party officials from all levels of the country, government officials, business leaders, provincial heads and military commanders. One of the highlights of the meeting is the work report of Prime Minister Li Keqiang, which lays out the leadership's analysis of economic conditions and sets goals for the coming year. Li explained that China's economy is expanding at its slowest pace since 1989 and the beginning of the explosive reform era. He said it would be a "tough struggle" to reach the government target of 6 to 6.5 percent growth, a number that is slightly lower than the 6.6 percent recorded in 2018.
Virtually every measure of economic activity shows weakness. Cellphone shipments marked double-digit declines in January, as did car sales (the seventh straight monthly fall) and the number of unsold houses is at its highest level in two years. The Purchasing Manager's Index, a respected measure of factory activity, has plummeted to its lowest level in three years. To adjust, companies have begun to lay off workers. Li blamed "profound change in our external environment," in particular U.S. President Donald Trump's trade war, for the frictions that China is facing.