Key Things To Watch over the 19th National Congress in China

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Focus Turns to China

While the politics of Europe and the US have been the main market focus over the last two years, the focus is now turning east as the Chinese Communist Party Congress convenes its twice-a-decade meeting. The primary purpose of the congress is to elect new political leaders and discuss policy for the next five-year period. The main expectation is that the congress will mark a further consolidation of power for President Xi Jinping with some commentators suggesting that the current President will look to extend his rule beyond the ten-year presidential limit.

2,287 Chinese delegates will meet in Beijing to select officials for the Communist Party’s elite, 205-person Central Committee who will then appoint a 25-person Politburo ahead of the unveiling of a Politburo Standing Committee. This seven-person Politburo Standing Committee is at the top of Chinese politics.

Investors Looking For Clues on Government Policy Plan

The event will also see the selection of government posts at a lower level as well as the heads of state-run companies. While focus will mainly be on these selections, investors are also looking for clues as to how the country will balance economic growth over the five year horizon while also dealing with issues such as soaring corporate debt, a property bubble, and pollution.

 

What to Watch

While the duration of the Congress is currently unknown, initial focus will be on President Xi’s opening day speech where he will highlight his achievements over his first term as well as outline his policy outlook over his second term.  This speech will be a rare chance for investors to gain insight into the priorities of the President over the next five years.

Another point of focus will be on the Politburo Standing Committee selections as five of the seven members have now reached the “mandatory” age of retirement, 68, though resident Xi is expected to look to bend the rule to keep Wang Qishan, who is a close ally of the President, in office. Observers will also be keen to see if the President reveals a potential successor as Xi himself was unveiled in 2007 as a future leader by Hu Jintao at the 17th Communist Party Congress. Since Xi took control of the government five years ago, there have been few potential leaders emerge as power has become increasingly centralised around Xi.

Wang Qishan Key to Understanding President Xi’s Plans

Analysts of the Chinese political landscape suggest that key to understanding the future plans of the President, will be Wang Qishan’s position at the end of the Congress. If Qishan is kept in place, this will be taken as a signal that President Xi is likely to look to extend his reign beyond the 20th Party Congress due to be held in 2022.

Supporters hope that with more power the President will be able to successfully pass through structural and economic reforms though those opposed to the President highlight the risk of the government falling back into old habits such as focusing on driving GDP growth of a lower quality rather than focusing on driving better quality, sustainable growth.  China is targeting 6.5% GDP growth this year,

and typically, economic activity picks up in the year following the Communist Party Congress. The PBOC announced on Monday that its governor Zhou Xiaouchan forecasts growth of 7% over H2 thanks to a rise in household spending. Alongside the Congress, investors will also be watching 3Q GDP figures due on Thursday.

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