China is set to unveil a new five-year plan and other socioeconomic targets for 2021 when its annual meeting of parliament, the National People’s Congress, begins on Friday.

China expected to propose a hike in the military budget as tensions mount. Beijing has vowed five-year plan dedicated to climate at the same time growth and security concerns also weigh.

During the session, China is also expected to unveil changes to the electoral system in Hong Kong, which would tighten Beijing’s grip over the city where it imposed sweeping new national security legislation last year.

Meanwhile, China’s services sector activity grew at its slowest pace in 10 months in February as firms struggled with sluggish demand and high costs, a private sector survey showed on Wednesday, prompting them to cut jobs.

The Caixin/Markit services Purchasing Managers’ Index (PMI) fell to 51.5, the lowest since April, from 52.0 in January but remained above the 50-mark that separates growth from contraction on a monthly basis.

A sub-index for employment stood at 47.9, slipping into contraction after six months of growth, as businesses laid off workers, the survey showed. New export business also shrank after expanding for three months.

The loss of momentum came as China faced coronavirus flare-ups at the start of the year, while overseas demand continued to be hit by the COVID-19 pandemic. The findings were largely in line with an official survey released on Sunday.

“The momentum of post-epidemic services recovery further weakened,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.

“Service providers cut staff to reduce costs as weakened market sentiment had a knock-on effect on the job market.”

The services sector, which had been slower to recover initially from the pandemic than the industrial sector, is more vulnerable to social distancing restrictions.

Domestic COVID-19 cases have however been stamped out in China since early February and analysts expect a strong rebound in full-year growth.

February also saw the Lunar New Year holidays, when many workers return to their hometowns, although this year saw far fewer trips amid coronavirus fears.

Costs for services firms continued to grow quickly, although at a slower pace than the month before.

But Chinese services firms remained optimistic about the year ahead, with business expectations over the next 12 months rising from January.

Meanwhile, China stocks posted their biggest one-day gain in three weeks on Wednesday, led by banking and commodity shares, as hopes of domestic economic growth offset fears of tighter monetary policy.

Some traders also attributed the market strength to bullishness ahead of the annual gathering of the National People’s Congress, which starts on Friday.

The blue-chip CSI300 index jumped 1.9% to 5,452.21, while the Shanghai Composite Index gained 2% to 3,576.90 points. Both indexes notched their best performance since early February.

China’s top banking watchdog said on Tuesday regulators were studying effective measures to reduce the risk of foreign capital inflows. The remark is interpreted by some as pointing to Beijing’s little willingness to lift interest rates, a move that could invite more inflows.

 Investors also shrugged off results from a private-sector survey showing China’s services sector activity grew at its slowest pace in 10 months in February.

 “We expect manufacturing and services PMIs to recover in March, as the COVID-19 situation was quickly brought under control in recent weeks. Beijing may gradually relax some social distancing rules in coming months and some pent-up demand could be released,” Nomura wrote.

 Larry Hu, an economist at Macquarie Capital, said that there’s no need to worry about inflation in China.

 “For 2021, we expect China to see reflation, but not high inflation,” Hu wrote. “The reflation trend is great news to COVID losers such as financials and industrial companies.”

Cyclical stocks rose sharply, reflecting investor optimism toward economic growth. Banking shares jumped nearly 5%, while energy stocks rose over 3%.

Separately, Chinese steel rebar futures surged more than 5% on Wednesday to their highest level in about a decade, as the country’s plan to take more environmental-protection measures stoked worries about a cut in production.

Besides the industry ministry’s pledge to cut crude steel output this year, heavy pollution alerts issued in Hebei province and the upcoming annual parliament meeting will also affect steel products’ output in the short term, SinoSteel Futures said in a note.

Seven blast furnaces in the top steel-making city of Tangshan were required to be shut down by March 10, which might likely lower pig iron output by 5,000 tonnes a day, according to GF Futures.

The most-actively traded rebar contract on the Shanghai Futures Exchange, for May delivery, closed up 3.9% to 4,842 yuan ($749.11) per tonne. It surged as much as 5.6% to the highest level since August 2011 earlier in the session.

China’s trading volume for steel products used in construction stood at 196,800 tonnes on Tuesday, the highest daily transactions since Jan.4, according to Mysteel consultancy.

Hot-rolled coil futures, used in cars and home appliances, jumped 3.5% at close to hit a record high of 5,026 yuan per tonne.

Prices of steelmaking raw materials also gained.

Benchmark iron ore futures on the Dalian Commodity Exchange rose 1.8% to 1,154 yuan a tonne.

Dalian coking coal surged 6.2% to 1,525 yuan per tonne and coke increased 0.8% to 2,520 yuan per tonne.

Stainless steel futures on the Shanghai exchange fell 2.1% to 14,685 yuan a tonne.

China’s yuan inched up against a weaker dollar on Wednesday, with market sentiment recovering from comments made by a top banking regulator a day earlier about managing capital inflows.

China’s top steelmaker Baowu Steel Group and regional producer Fujian Sangang Group have signed agreements to invest 20 billion yuan in two separate steel projects in the southeastern Fujian province, local media reported on Tuesday.