Charlie Awdry and May Ling Wee, China portfolio managers, discuss the significance of the upcoming 19th National Party Congress as well as the progress made in financial reform during President Xi’s first five-year term.
China’s Party Congress is due to open on 18 October, marking the end of President Xi Jinping’s first five-year term. The Congress will also see the promotion of the next generation of China’s Communist Party leaders to the top policy-making body − the Politburo Standing Committee. Traditionally, these new leaders take the reins of power after the end of the current president’s second five-year term of office, in this case in 2022. However, as President Xi has been relentless in centralising power in his own hands over the last five years, many are watching the Party Congress for signs that Xi has filled the Standing Committee with his loyalists. The whole promotion process is completely secret and opaque to outsiders so we will wait to see who emerges from the Great Hall of the People at the end of the Congress.
In terms of reform under Xi’s stewardship, progress has been made in the opening of China’s capital markets through both the Shanghai and Shenzhen-Hong Kong Stock Connect as well as the Bond Connect. Anti-corruption measures have been relentless and we have seen the first evidence of mixed ownership reform, enabling private capital to be invested in state-run enterprises.
While a continuation of these policies in Xi’s second term is expected, we await further evidence of reforms to reduce debt in China’s state-owned enterprises (SOEs) corporate sector, the ‘hukou’ registration system (public services only available at registered birthplace − a major problem for China’s large migrant workforce), rural land reform and further financial market opening. In the weeks and months after the Party Congress we will be particularly keen on sensing any change in policy direction, although we doubt anything concrete will come out at the time of the conference itself.