Boosting domestic demand is another priority, with consumer confidence still weak. The continuation of the consumer goods trade-in programme (albeit scaled back slightly) and a new fund worth RMB 100 billion to promote domestic demand should benefit consumer durables companies. More favourable holiday and consumption tax arrangements would benefit a broader set of companies tied to domestic consumption, from tourism to retail.

 In the process, valuations have re-rated from being dirt-cheap to more reasonable (although still attractive compared to the US and the global benchmark). Investors are now looking for more evidence of earnings growth to extend the rally, or policies that could fuel earnings growth. This is why the market’s performance has been more muted so far this year.

Tech is the standout winner in this year’s “Two Sessions”. The government is emphasising the need for self-reliance as the rivalry with the US heats up. This means going beyond building a company or two that can compete with OpenAI, but constructing whole supply chains. Other than AI, priorities include artificial intelligence, supercomputing, semiconductors, aerospace, humanoid robots, 6G, bio-pharmaceuticals, and the “low-altitude” economy (e.g. drones).