Summary: The 20th Congress of the Chinese Communist Party will open on 16th October. Mr. Xi’s speech at the opening ceremony will provide importance directions about the futures of Chinese and global businesses in China.
The 20th National Congress of the Chinese Communist Party will start on 16th October. It is held every 5 years and usually last for a week. Mr. Xi Jinping is expected to secure a third five-year term as China's top leader and continue to be in the power until at least 2027.
China’s economy, the second largest in the world is in turmoil now. China’s zero tolerance approach to Covid-19 have hurt consumer demand and stalled businesses. Further, the property market which contributed about 25% of the country’s economic output over the last 10 years is deteriorating. The billions of dollars spent have failed to help stimulate housing demand. The zero Covid-19 policy has also hurt consumer demand and impacted businesses. Foreign investment has also weakened during the pandemic. All these factors has hurt China’s economy, with growth coming in at just 0.4% for the period from April 2022 to June 2022 compared to the same period in 2021 and this run rate will likely lead to lower than expected growth (5.5%) this year.
Mr. Xi’s speech at the opening ceremony will provide an important direction about the future of Chinese and global businesses in China.
- How Mr. Xi defines the term “common prosperity” will be a key focus. It is possible for him to include a more progressive tax system, social spending program and deregulation of small business.
- The Chinese official media has published numerous articles on border reopening. It is a possibility that Mr. Xi would announce during the party congress meeting about easing back on the zero-Covid-19 policy. Any hints on gradual loosening of the policy will be taken as positive for the market.
- Another big uncertainty will be whether China will pursue some kind of military action against Taiwan. Any vague comment on the progress for trying to bring Taiwan under the mainland China’s political control could post a negative impact on the financial confidence in both Taiwan and China.
- The most important task is to elect the party’s leaders. Hu Chunhua is seen as having a stronger political base than Wang Yang as he is younger (59 years old) to be a potential successor to Mr. Xi. However, many businessmen and experts think Mr. Xi is more likely to choose Mr. Wang who pose no potential political treat to him.
Source: https://www.home.saxo/content/articles/equities/st-note---china-20th-party-congress-meeting-14102022
