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China: Key takeaways from the Government Work Report for 2021 (政府工作报告)

Premier Li Keqiang first outlined the measures taken by the Chinese government in the context of the Covid-19 pandemic whose origin is still unclear but whose first outburst has been witnessed in Wuhan, China.

In the face of the pandemic, and in accordance with Party guidelines, the State has formulated and implemented macroeconomic policies which have stabilized the Chinese economy. This included the gradual implementation of large-scale tax and fee reductions, combined with institutional arrangements, which represented altogether a total fiscal support of 2.6 trillion yuan in 2020, including 1.7 trillion yuan of waved social insurance premiums. An additional 2 trillion yuan of fiscal funds, which were directly allocated by the central government to provincial governments, cities and rural counties

The government has also directed the large commercial banks to increase loans in a targeted manner and lower interest rates, postpone repayment of principal and interest for loans to small, medium and micro enterprises, and to increase inclusive loans to small and micro enterprises by more than 50%, and transfer 1.5 trillion yuan in profits from the financial system to the real economy. As a result, the economic recovery was better than expected. The annual GDP grew by 2.3%. The government acquired more experience in macro-control and achieved more for a reasonable cost.

The priority has been given to the stability of employment and people's livelihood. This entailed the creation of 11.86 million new urban jobs in 2020 [significantly higher than the 9 million new jobs target set in March 2020], and the reduction of the surveyed unemployment rate in cities and towns nationwide to 5.2% in December 2020, down from a (very relative) peak of 6.5% in February 2020.

The government is set to "unswervingly promote reform and opening up", and further move in the direction of a market-oriented allocation of production factors. The government is also intent to "vigorously promote technological innovation and accelerate the pace of industrial transformation and upgrading.

While reaffirming the results achieved in the fight against the pandemic and the attainment of the previously fixated development targets, the Premier also acknowledged the prevailing difficulties and challenges.

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