Financial risks hang over China legislature meeting

Benjamin CARLSON
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Gathering of 3,000 National People's Congress (NPC) delegates at Beijing's cavernous Great Hall of the People is staged annually

China's rubber-stamp legislature convenes this weekend with the script focused on containing worrisome economic risks while President Xi Jinping consolidates power ahead of a pivotal Communist Party meeting later this year.

The gathering of 3,000 National People's Congress (NPC) delegates at Beijing's cavernous Great Hall of the People is staged annually by the all-powerful party to portray a facade of popular rule.

It typically has little actual bearing on politics but will be scrutinised this year for clues ahead of this autumn's far more consequential Communist Party Congress, an event held only every five years.

Since taking over in 2012 Xi has consolidated power more rapidly than any leader in decades.

He is expected to unveil a leadership shuffle at the autumn gathering amid speculation it could indicate he intends to stay on beyond the traditional 10-year term.

"This is a watershed year," China politics analyst Willy Lam, of the Chinese University of Hong Kong, said of the political machinations.

The NPC curtain rises Sunday with Premier Li Keqiang's annual report, which will include this year's growth target, a closely watched indication of the leadership's mood on the economy.

The Communist Party stakes its ruling legitimacy on the ability to sustain growth, but the economy last year expanded 6.7 percent, its slowest pace in a quarter of a century.

Analysts expect Li to aim for growth of 6.5-7 percent, same as the target he set last year.

- Caution and control -

Slowing growth complicates government efforts to shift from an economic model based on debt-fuelled investment and exports, and towards a consumer-driven one, while also trimming bloated industrial sectors.

Other risks include a slumping currency, massive capital flight by Chinese enterprises seeking better returns abroad, and fears of a housing bubble and bad-loan crisis.

Caution and control are expected to dominate NPC discussions.

"We expect the meeting this year to confirm a shift in policy towards reining in risks and away from supporting short-run growth," Capital Economics said in a report.

In perhaps a preview of NPC discourse, China's new banking watchdog Guo Shuqing warned Thursday of threats posed by debt-strapped state-owned firms, inflated real-estate markets, and massive unregulated lending.

He promised to end regulatory "chaos".

Anticipated to run for 10 days, the NPC kicks off with a splash of colour as delegates from China's dozens of ethnic minorities arrive in traditional dress alongside military officers in full uniform -- images meant to reinforce national unity.

Facing pressure over severe smog, authorities have shut down factories and other polluting activities in northern China to clear the air for the legislative show.

But official forecasts nonetheless say the capital will be shrouded in smog this weekend.

As with each year, security has been ramped up in Beijing and elsewhere to prevent political or social unrest disrupting the session.

On Monday, some 10,000 armed police staged a mass rally against "terrorism" in the restive western Xinjiang region to discourage persistent violent attacks in the traditionally Muslim area, where many chafe under Chinese rule.

- Flames of nationalism -

With the nation watching, leaders are also expected to flex their muscles on Taiwan and Beijing's claims to disputed territory in the South China Sea.

After his November election win, US President Donald Trump angered Beijing by suggesting he might strengthen relations with self-ruled Taiwan, which China claims as its own.

Tensions have eased as Trump walked back his comments in a phone call last month with Xi, but concerns remain that his administration could stoke conflict over trade, Taiwan or the sea disputes.

Beijing may seek to "drum up nationalism" during the NPC session to project strength and "warn Washington not to stir up trouble in Taiwan, if not also the South China Sea", said Lam.

"I think this will be a good occasion for them to stoke the flames of nationalism," he said.

The NPC session runs concurrently with that of a separate body opening Friday which, though powerless, draws interest as it includes celebrities such as film star Jackie Chan, basketball giant Yao Ming and some of China's richest corporate chieftains.