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At the Communist Party Congress starting in Beijing on October 16, Xi Jinping is expected to be named to a third five-year term as the country’s top leader, paving the way for a consolidation of power on a scale not seen in decades.
Under Mr Xi, China has become the world’s dominant manufacturer of everything from cement to solar panels, as well as a major trading partner and dominant lender For most of the developing world. It has built World’s largest navySome of the best in the world Most advanced ballistic missile And Built air base On artificial islands spread across the South China Sea.
But China’s economy, the second largest, now In a tailspin. Its property market, which contributed a quarter of the country’s economic output over the past decade, is melting. Foreign investment has declined. And the massive lockdown and mass quarantine, part of China A zero-tolerance approach to Covid-19Consumer demand hit and businesses stalled.
At the same time, Mr. Xi has worked to turn China into a more state-led society that often puts national security and ideals ahead of economic growth. he has Crack down on Chinese companies and limit the powers of their executives. Some famous entrepreneurs in China has left the country And others, like Alibaba co-founder Jack Ma, have largely disappeared from public view.
All these have hurt China’s economy, which Only 0.4 percent were larger April to June compared to the same period last year. Growth was well below the government’s initial target of around 5.5 percent growth this year. For the first year since 1990, China’s economic growth is expected to lag behind the rest of Asia.
Mr. Xi’s next steps could have huge consequences for the global economy Multinational companies like General Motors and Apple have bet on China as a reliable place to manufacture products and as a growing market. But rising tensions between mainland China and Taiwan, particularly after Russia’s invasion of Ukraine, have prompted major American and European companies to scramble to set up backup supply chains elsewhere.
At the same time, China’s imports of foreign goods have stumbled as Chinese consumers become more cautious spenders and the Chinese government subsidizes local companies to produce substitutes for imported goods. The Shanghai stock market is down about 17 percent so far this year.
The main task of China’s ruling elite at the Party Congress, a gathering that takes place once every five years and usually lasts a week, will be to confirm the lineup of China’s leaders. But Mr. Xi’s keynote opening speech will provide important clues as to what the future holds for business in China and around the world.
Mr. Xi’s speech will be full of Communist Party ideological jargon and will probably be very long — his speech At the beginning of the last party congress, in 2017, lasted over three hours. But buried in that terminology may be some important messages. Here’s what finance leaders and corporate executives around the world want to know.
Domestic Ideology: ‘Common Prosperity’
One of Mr. Xi’s favorite economic policy initiatives in recent months has a simple, innocuous-sounding name: “general prosperity“What does the big question mean?
Common prosperity, a longtime goal of the Communist Party, has been defined by Mr. Xi as reining in private capital and narrowing China’s vast disparity in wealth. Regulators and tax investigators cracked down on tech giants and wealthy celebrities last year. Beijing claims that tycoons give back to society. And Mr. Xi has strongly discouraged housing speculation, instead pushing for government subsidies to build more rental apartments.
A regulatory crackdown on tech firms and post-school education institutions contributed to a wave of layoffs that left one in five young Chinese city dwellers unemployed by August. Credit limits on China’s hyperinflationary housing sector have dampened the number of new construction project starts and a wave of uncertainty among real estate developers. Many Western hedge funds that bet heavily on real estate developers’ foreign bond issues have suffered substantial losses.
The term “general prosperity” was rarely used by high officials That setback was last spring. But Mr Xi clearly revived it during a visit to northeast China in mid-August. Later the Politburo Mentioned general prosperity When it announced the starting date and agenda of the party congress on August 30.
It is less clear how Mr. Xi will define the term in his opening speech at the Party Congress. Possibilities include calls for everything from more progressive taxation to more social spending programs to deregulation of small businesses.
After Mr. Xi’s speech on Oct. 16, “I think we’ll have a better sense of whether it’s more state-directed or more market-directed,” said Joe Mazur, senior analyst at Trivium China, a Beijing consultancy. .
Trade: ‘Dual Circulation’
Mr. Xi’s mantra for foreign trade and industrial self-reliance, Put forward to 1st May 2020, a theory he called “dual circulation”. The concept involves relying mainly on domestic demand and innovation to drive China’s economy, while retaining foreign markets and investors as backup engines of growth.
Mr. Xi has been pushing ahead with huge subsidies for the development of Chinese manufacturers, especially semiconductors. But the slogan has drawn considerable skepticism from China’s foreign investors and foreign governments. They worry that the policy is a recipe for import substitution with Chinese-made products.
China’s imports have actually stagnated this year while its exports have risen, production has shown The world’s largest trade surplus. This surplus, not domestic demand, has sustained China’s economic growth this year.
Chinese officials deny they are trying to discourage imports and claim China is eager to welcome foreign companies and products. When the Politburo scheduled the Party Congress for October 16, it did not mention dual circulation, so the term can be omitted. If it is not mentioned, it can be a conciliatory gesture like foreign investment in China already weakMainly due to the strict epidemic policy of the country.
Pandemic: ‘Covid Zero’
China’s zero-tolerance approach to Covid-19 has prevented many deaths and long-term infections, but at a high and growing cost to the economy. There are now questions about when Mr. Xi will move to a less restrictive position toward containing the virus.
The United States has 800 times more epidemic deaths per million inhabitants than China, according to official statistics from at least two countries. But China has achieved its record by sweeping lockdowns — including one that lasted two months in Shanghai last spring — and by closing the country almost entirely to international travelers.
Foreign investment has stalled during the pandemic. Top officials have turned their attention to other countries that they can more easily reconfigure. Multinationals have had trouble getting government permission to send engineers to their operations in China, and sending dependents has become more difficult.
China still lags behind in vaccinating citizens over the age of 80. Few people in China have developed resistance to the virus through prior exposure. So almost no one expects Mr Xi to announce a quick retreat from the zero-covid policy during the party congress, although there may be signs of a gradual relaxation.
Taiwan: What comes next
The biggest uncertainty about China for international business is whether it will take any kind of military action against Taiwan in the coming years. Businesses worldwide have already suffered billions of dollars in losses on Russian operations that they must sell or liquidate following Russia’s invasion of Ukraine, which has prompted widespread sanctions by the world’s leading democracies.
In 2021, Mr. Xi received thunderous applause In Tiananmen Square, on the 100th anniversary of the founding of the Chinese Communist Party, when he reiterated China’s claim to Taiwan, a self-governing island democracy. President Biden has stated four times that the United States is ready to help Taiwan resist aggression. Each time his aides have scaled back his comments, but insisted that the US maintains a policy of “strategic ambiguity” regarding its support for the island.
Even Mr. Xi’s vague mention at the party congress of a timeline for trying to bring Taiwan under mainland political control could damage financial confidence in both Taiwan and the mainland.
New leaders
The most important function of the ruling group in the Congress is to ensure the leadership of the party.
Especially important for business is who will be the new premier in the lineup. The prime minister heads the cabinet but not the military, which is directly under Mr Xi. The position oversees the finance ministry, commerce ministry and other government agencies that make many important decisions affecting banks, insurers and other businesses. Who will be elected will not be announced until a separate session of the National People’s Congress next March, but the day after the congress officially ends, members of the new Politburo Standing Committee – China’s highest body of political power – will walk a stage. In order of rank. The order in which the new leadership team is walking may make it clear who will be prime minister next year.
China’s constitution bars Premier Li Keqiang of the past decade from serving a third term in office. Possible successors to Mr. Li include Wang Yang, the leader of the Communist Party’s top advisory body, and Hu Chunhua, one of China’s four vice premiers.
Both coincidentally spent five years at the helm of Guangdong Province, A leading center of entrepreneurship and foreign investment In China. Neither has given many clues about their economic thinking since taking office in Beijing. Mr. Wang had a strong reputation for pursuing free-market policies while in Guangdong.
Mr Hu is seen as having a stronger political base than Mr Wang because he is still 59 years old, making him a potential successor to Mr Xi. That political strength could push him back somewhat against Mr. Xi’s recent tendency to favor larger government and Communist Party control of the private sector.
Precisely because Mr. Hu is young enough to be a potential successor, however, many businessmen and experts believe that Mr. Xi is more likely to choose Mr. Wang or a dark horse candidate who poses no potential political threat to him.
In any case, the prime minister’s power has been reduced as Mr Xi has created a series of Communist Party commissions to draft policy for the ministry, including a commission that sets many fiscal policies.
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