Meetings take place against challenging domestic and overseas backdrop

Many observers from around the world will be looking for the course China will take as the annual two sessions political meetings open in Beijing next week.

Deputies of the National People's Congress, the country's top legislature, and members of the Chinese People's Political Consultative Conference National Committee, the leading political advisory body, will arrive in the capital for the events.

Although trade tensions between the United States and China appear to be easing, the meetings are still taking place against a challenging domestic and international economic backdrop.

Observers will be watching for the government's policy priorities at the meetings, which have added significance because they will be the last before the People's Republic of China marks its 70th anniversary in October.

Much will be revealed when Premier Li Keqiang delivers the Government Work Report after the NPC meeting opens on Tuesday. The CPPCC National Committee opens its session on Sunday.

The Government Work Report includes the target for GDP growth for the current year. Last year, it was set at "around 6.5 percent", with the eventual outcome being 6.6 percent.

Although this was the lowest annual growth rate since 1990, the country remains on course to becoming a "moderately well-off society" (as measured by the doubling of 2010's per capita GDP) by the end of next year in time for the 100th anniversary of the founding of the Communist Party of China in 2021.

Many expect the new target to be in a range of 6 to 6.5 percent, even though there has been some early-year buoyancy in the economy, with record bank lending growth in January. New loans hit 3.23 trillion yuan ($480 billion), compared with 2.9 trillion in the same month last year.

With few observers expecting a major surprise with the growth target, the main focus is likely to be on the government's domestic agenda. This involves further moves on supply-side reforms, State-owned enterprise reform, policies to boost the private sector, tax cuts to increase consumption, tackling shadow banking, rural revitalization, and further opening-up of the economy and allowing greater market access to foreign companies.

Louis Kuijs, head of Asia economics at research consultancy Oxford Economics in Hong Kong, expects the new GDP target to be in a range of 6 to 6.5 percent, rather than a specific figure.

He said that while reduced growth may disappoint some, the rest of the world cannot continue to expect China to deliver a quarter of global economic expansion, as it did in the aftermath of the 2008 global financial crisis.

"(What foreigners think) is not something that Chinese policymakers should worry too much about. This is something for them to deal with. Those expecting a (China) stimulus program just to lift global markets are going to be disappointed," he said.

Kuijs believes some of the concerns about the Chinese economy at the end of last year were exaggerated and that the slowdown is likely to bottom out.

"The government has eased its (monetary) policy stance, and that is now starting to show up. People should be less worried. That the government is anchoring or targeting a more modest rate of growth so long as it is in control of the slowdown should be seen as the correct course of action for it to take," he said.

Andy Mok, research fellow at the Center for China and Globalization, an independent think tank in Beijing, also believes the government will set a "range target" for GDP of 6 to 6.5 percent.

He feels that much of the commentary on China's slowing growth lacks sophistication.

"There is a laziness of thinking when people refer to China growing more slowly. The government has talked for years about shifting to higher-quality growth and it is inevitable that the growth figure will decline. What is not emphasized is that 6 percent on the current data is much larger absolutely than 10 percent 10 years ago, because of the increased size of the economy."

George Magnus, a research associate at the University of Oxford China Centre and author of the recent book Red Flags, which looks at the challenges facing China's economy, believes the government will be attempting to perform a balancing act by setting a more modest target.

He said the government would be making it clear that it is no longer going to pump-prime the economy as it did with its 4 trillion yuan stimulus package in the aftermath of the financial crisis or the credit expansion that led to the stock market bubble of 2015.

"A lower growth target will be a sign the government wants to stabilize the economy without necessarily pumping credit into it," he said.

"I think the credit expansion in January might be something of an outlier (statistical outcome) and there would be concerns if it was repeated in February and March."

In addition to the overall macroeconomy, the report is likely to reiterate the government's commitment to State-owned enterprise reform as well as support for the private sector, particularly in regard to the funding available to small and medium-sized businesses.

During a visit to Liaoning province in September, President Xi Jinping said it was wrong to "badmouth" State-owned enterprises, and also stressed the government's "care and support" for the private sector.

Edward Tse, founder and CEO of Gao Feng Advisory, a management consultancy, said Xi was right to do so.

"The real strength of the Chinese economy is that you have State-owned enterprises and private companies sitting side by side and having different roles to play," he said.

"Although sometimes there are glitches, they actually complement each other. They give China's economy this extraordinary resilience that is just not seen in other parts of the world. It is a real strength of China."

However, Kuijs, at Oxford Economics, thinks it will be important for the government to do something to boost the private business sector, which he believes has been experiencing a loss of confidence.

"It would be good to see concrete, strong language on how policymakers are trying to improve the business environment," he said.

"Reform of SOEs is not about privatizing them, but reducing some of their privileges so that there is more of a level playing field between the State-owned and private sectors. This has been problematic because a number of ministries and other entities that are supposed to regulate markets have been lobbyists and champions of SOEs in the past."

The Government Work Report is also likely to focus on technological ambitions, particularly in areas such as advanced manufacturing, robotics and artificial intelligence.

The government's aim is for the country to be a global technological leader by 2035 - as set out in Xi's report to the Communist Party of China 19th National Congress in October 2017 - and a major collaborative effort is being made nationwide to meet this goal.

Tse, author of China's Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies are Changing the Rules of Business, said: "I am sure the work report will place great emphasis on the importance of innovation. It is an important part of the upgrading of the whole economy.

"For China to become an innovation nation requires major investment in research and development, some of it in fundamental research and some in more applied forms. The government wants local administrations, in particular, to seek out opportunities to work with private companies."

Many observers will be looking to the report for measures to boost consumption. The government announced a series of tax cuts last year. Other such reductions for small businesses were announced in January, including the exemption of many micro businesses from value added tax.

Kuijs said, "Compared to earlier episodes of fiscal easing, we have seen this move toward tax cuts away from public investment.

"This way, you leave it up to the companies and people to spend the money. Evidence from around the world suggests, however, that you get less of a fiscal boost from tax cuts than from public investment, so we see this having more of a stabilizing effect on the economy than giving it a significant rebound in growth."

One vital aspect of the economy remains the property sector, with the government wanting to curb speculation.

Many will be looking for indications in the report about the future direction of policy.

Sam Xie, head of research at commercial property consultancy CBRE China, said, "Several cities have already partially eased curbing measures such as sales restrictions, price limits and purchase limitations, while commercial banks have lowered mortgage interest rates.

"Third - and fourth-tier cities, many of which have a large volume of unsold inventory, may further loosen policies this year."

Many observers expect the overall package of reforms to focus on improving the supply side of the economy, dealing with financial risk, particularly in the shadow banking sector and further opening up the economy.

Jiang Hao, a partner in Shanghai for management consultancy Roland Berger, said it is important that progress is made in all these areas.

"These measures and issues have been on the government's agenda in recent times. It is critical for China to provide solid solutions in each of these areas to maintain the growth rate and also arrive at healthier development, while at the same time remaining internally competitive," he said.

Jon Geldart, executive director, Greater China, for international accountants Grant Thornton, said he is expecting the report to flesh out the details of policy in some of these areas.

"I fully expect more detail and emphasis on these important areas. It is the ability of the central government to ensure effective and consistent application across all provinces that is the key to success. Provincial leaders need to commit to implementation and be held accountable to the Party and the people for so doing," he said.

With the global economic outlook remaining uncertain, there will be keen interest worldwide in the report.

Magnus, at the University of Oxford China Centre, said: "None of the major engines of the world economy are firing at the moment. The US has lost its fiscal boost and there is no strong forward momentum from Europe.

"China has been slowing down, and what we are likely to see in the work report will be the government trying to continue to stabilize the economy. It would be unrealistic to see any major boost."

Chen Yingqun contributed to this story.