As this year began, the leaders of the Chinese Communist Party appeared to have many of their ducks in a row.

They were set to finally sign a trade deal with the Trump administration, potentially ending a dispute that had bedeviled relations for almost two years. They were managing the slowdown of the world’s second-largest economy in a controlled fashion. And they had faced down a pro-democracy uprising in Hong Kong.

All of that changed in the first week of January, when word arrived in Beijing of a potentially devastating virus that was circulating in Wuhan, an industrial Chinese city that straddles the Yangtze River.

Within six months, the virus would kill more than 336,000 people worldwide, nearly 30 percent of them in the United States. And it would come to pose the biggest economic and political challenge to party leaders in three decades.

The calamitous economic impact of the virus was laid bare Friday when the party declined to set a growth target, for 2020, for the first time since it began setting such a goal in 1994.

“I would like to point out that we have not set a specific target for economic growth this year,” Premier Li Keqiang said when delivering his “work report” at the grandiose opening of the National People’s Congress in Beijing. “This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the covid-19 pandemic and the world economic and trade environment.”

Even the meeting itself, the second part of the annual piece of political theater known as the “Two Sessions,” had been affected by the virus. For the first time, it had been delayed from early March, and all deputies arriving into Beijing from outside the capital had to submit to coronavirus tests before traveling.

At the opening of the first session — the meeting of the top political advisory group — party leaders announced that they would be moving to exert more control over Hong Kong, a step that essentially spells the end of the “one country, two systems” framework that has allowed the city to operate relatively independently of Beijing.

There was little mention of Hong Kong at the session on Friday, however, when Li stood before some 3,000 mask-wearing deputies and a few dozen maskless party nomenklatura to deliver the shortest speech on memory, clocking in at barely an hour.

Last year, Li set the growth target at 6 to 6.5 percent, and it came in at 6.1 percent, according to official statistics. While it was within the set range, it was still the slowest rate of growth that China had recorded in three decades.

Party leaders reportedly discussed setting this year’s target at 2 to 3 percent, a figure that would have been shockingly low after years of double-digit growth that had inched down steadily over the last decade. This would also have made clear that China would not be meeting leader Xi Jinping’s social development goals, which Chinese economists say requires growth of at least 5.6 percent this year.

After almost completely shutting down during February and March, the economy contracted by 6.8 percent in the first quarter. Now, with the domestic environment remaining subdued and China’s export markets being ravaged by the virus, the International Monetary Fund estimates that the Chinese economy will grow by a mere 1.2 percent this year.

“The global coronavirus pandemic has created grave uncertainties for the Chinese economy,” said Wei Jianguo, a former vice-minister of commerce who is now vice chairman of the China Center for International Economic Exchanges, a state-affiliated think tank.

“By not setting a growth target this year, the central government is actually encouraging officials to focus on its priorities — especially ensuring a stable job market — and to pursue high-quality development, instead of exerting all energy to meet a specific GDP figure.”

In Friday’s work report, Li chose to focus on job creation.

Official statistics show that unemployment stands at 6 percent, near record highs, but independent economists say the true rate is probably double that. Li announced a lower job-creation target this year, setting a goal of 9 million new jobs in the cities — down from 11 million last year.

“They expect a pretty large unemployment or underemployment problem, especially among college graduates,” said Victor Shih, an expert on China’s political economy at the University of California at San Diego. His Chinese counterparts had been told to admit undergraduates into graduate programs so they won’t hit the labor market this year, Shih said.

At the other end of the spectrum, about one-fifth of migrant workers — who power China’s factories — have not returned to work after the lockdowns that coincided with the Lunar New Year, when these people traditionally go home for annual holidays.

Damien Ma of MacroPolo, the in-house think tank of the Paulson Institute in Chicago, said that he was surprised by the number of times Li mentioned the private sector and particularly small and medium-sized enterprises.
“I think they realize that they’re going to have a big jobs problem if they don’t support the private sector,” he said. 

In his speech, Li acknowledged that the downturn would be particularly tough for local authorities. He said the government would issue special government bonds and allocate some $280 billion to prefecture and county governments to ensure employment and meet basic living needs.

“These are extraordinary measures for an unusual time,” the premier said.

But Li’s report did contain a glimmer of good news for the Trump administration.

Li said China is willing to stick to its side of the Phase 1 trade agreement that Beijing and Washington signed in January.

“Because of covid-19 and the continuing worry about the economy and the fiscal situation,” said Shih, of UC-San Diego, “it doesn’t seem that the Chinese government is in the mood to pick fights with the United States on the trade front, at least not without an obvious move from the U.S. side to re-escalate the trade tension.”