Mr Xi Reveals His Blueprint for China’s ‘New Era’Learn more about this firm
Every five years, the top governing body of China’s communist party meets to endorse important decisions and announce changes to its leadership. Since the 24 October conclusion of the latest National Party Congress (NPC) in Beijing, investors have been analysing the results to determine the direction of the world’s second-largest economy.
While no major surprises were announced, some investors expressed concerns about the continued lack of transparency on how the Communist Party of China (CPC) makes its decisions. At the same time, the market seems to have been reassured by the appearance of improved political stability and policy continuity – and by the CPC’s clear vote of confidence for the continued leadership of General Secretary Xi Jinping.
Mr Xi’s leadership is firmly established
During the NPC, Mr Xi spent more than three hours delivering his long-anticipated report to Congress members. While his overall objective continues to be "growth with stability", he put more emphasis on the absolute leadership and ideology of the CPC. This was in line with the market’s expectations. There were also signs that Mr Xi has strengthened his authority within the CPC:
- The party’s new constitution now includes Mr Xi’s thoughts among its guiding ideologies – right alongside Mao Zedong’s and Deng Xiaoping’s.
- Breaking with tradition, the conference concluded without naming a clear successor to Mr Xi, paving the way for him to continue leading the party after his allotted second five-year term expires.
Mr Xi’s blueprint: “Socialism with Chinese Characteristics for a New Era”
While many of the general secretary’s broad policy objectives have been mentioned repeatedly in the past few years, his new blueprint contains key items that are likely to have a lasting impact on China’s future development. Deeper reforms, an emphasis on industry upgrades and innovation, and tighter environmental protection restrictions are among the areas that could have implications for investors.
2020 vision and beyond
No specific economic growth targets were announced during this NPC; instead, a longer-term development plan for the period between 2020 and 2050 was unveiled for the first time. Mr Xi aims to make China a modern socialist country by 2035 by boosting its cultural influence, growing the size of its middle class, establishing a more equal society, improving public services and creating a cleaner environment. Building on this foundation, China aims to become an affluent country of advanced and balanced development by 2050 – though finding the right combination of growth, stability and reform will continue to be the key challenge ahead.
6 focus areas for China’s economic development
General Secretary Xi reiterated the importance of structural transformation in China and highlighted six areas of economic development focus:
- Supply-side reform – In addition to removing excess capacity, Mr Xi is emphasizing an efficient use of resources
- Research and innovation
- Rural area development
- Collaborated regional development
- Improving China’s socialist economic system (for example, by reforming state-owned enterprises and promoting private-sector development)
- Economic liberalization – Achieved through China’s “One Belt, One Road” policies to boost regional trade and investment, and through trade liberalization
We expect the market to have a mixed reaction to the news – or lack of news – announced at the latest NPC. While the low level of transparency and the absence of checks and balances may make some investors sceptical about China’s system, the market should welcome improved political stability, policy continuity, deeper reforms and financial deleveraging.
Mr Xi’s comments in Beijing also suggest that certain investment themes – including consumption upgrades, electric vehicles, automation, IT infrastructure, medical services and environmental protection – may be growth areas for China’s market, at least until the next NPC in five years’ time.
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