China’s Congress Convenes

This month, China’s leadership kicks off its 19th Communist Party Congress, a meeting which sets the agenda for China’s political, economic and even social path in years to come. More than 2,000 delegates from China’s ruling elite attend the Congress, which takes place every five years. Xi Jinping, China’s president and the Party’s general secretary, is likely to score a second five-year term to continue his agenda. There will likely be some other leadership and/or procedural changes at the Congress which could have implications for the country going forward.

My Hong Kong-based colleague Eddie Chow, senior vice president and managing director, Templeton Emerging Markets Group, and I discuss the importance of the meeting and some of the investment implications.

Mark Mobius: Eddie, China’s 19th Party Congress takes place this month, wherein the new Central Committee will immediately elect new members of the Politburo Standing Committee (PSC). The PSC contains seven to nine members and is where all authorities (of the Party and thus the country) are centralized. It is China’s top decision-making group. From your perspective, what is the significance of this event and any changes in leadership that may result?

Eddie Chow: China is a one-party state under Communist Party rule, and any changes with the top personnel and the system in which how the leaders are elected will certainly impact the country. The National Party Congress (NPC) is the highest leading body with the Communist Party of China (CPC). The delegates meet once every five years and discuss and decide on major issues of the Party. These include leadership changes, approval of revisions to the Party’s Constitution, and election of the Central Committee and the Central Commission for Discipline Inspection.

In addition to electing new faces at the PSC, it is widely believed approvals will also be sought to revise the constitution so that the PSC’s structure can be changed. We may see a change in how the authority is distributed among PSC members, and how the next generation of Party leaders will be chosen.

Mark Mobius: General Secretary Xi Jingping kicks off the Congress’ opening on October 18 with a Political Report, which addresses the priorities, themes, targets and the leaders’ assessment on current economic conditions. Of course, who leads China and how they shape the country has implications for investors since China is a planned economy.

Eddie Chow: We expect Xi’s Political Report will offer some hints for investors in terms of how the leaders aim to shape the country over the next five years. We’ll see an outline of the priorities of different reforms, such as state-owned enterprise (SOE) reform, Hukou (household registration) reform, land reform, urbanization, industrial upgrading, structural rebalancing, etc. He will also likely present longer-term grand visions, which should offer insights on how China’s economy can sustainably grow over the next decade.