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

The gathering of 3,000 delegates for the national people’s congress in Beijing’s Great Hall of the People is staged annually by the party.

And although it has little bearing on policy, it will be scrutinised this year for any clues about the state of the economy in premier Li Keqiang’s annual report on Sunday.

This will include a target for economic growth, which analysts expect to be unchanged from last year at between 6.5-7%. Growth in that band would continue the slowest rates for more than a quarter of a century, a development which has complicated government efforts to shift from an economic model based on debt-fuelled investment and exports towards a consumer-driven one.

The government also wants to trim its bloated state-owned government industries while tackling a slumping currency, massive capital flight by Chinese enterprises seeking better returns abroad, and fears of a housing bubble and bad-loan crisis.

The total of Chinese debt has reached almost 250% of GDP and Capital Economics China expert Julian Evans-Pritchard warned this week that the window for Beijing to tackle the problem by recapitalising the banks and allowing state firms to fail was “closing fast”.

A man wears a historic army uniform in Tiananmen Square ahead of the opening session of the national congress. Photograph: Thomas Peter/Reuters

The currency issue could also become a flashpoint. The yuan fell on Friday below the 6.9 per dollar level for the first time in one-and-a-half months, as the greenback continued to gain momentum on expectations of higher US interest rates.

Pressure on the Chinese currency was due to growing expectations the Federal Reserve could raise rates as early as this month after a solid run of US economic data and policymakers hinting a rate rise would be appropriate soon.

Traders will be looking for signs about whether the Beijing government is prepared to let the yuan fall further against the dollar and risk the wrath of US president Donald Trump, who has accused China of keeping the yuan low in order to boost exports to the detriment of US producers.

However, the People’s Bank of China has burned through a trillion dollars of foreign exchange reserves since 2014 in order to keep the yuan from falling even further, according to Capital Economics, and traders believe Beijing could allow the currency to float more freely against the dollar.

But 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”.

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.

Anticipated to run for 10 days amid heavy security, 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 – 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. Official forecasts nonetheless say the capital will be shrouded in smog this weekend.