20th Communist Party Congress: China’s tightrope walk
On October 12, the final plenary session of the 19th Central Committee of the Chinese Communist Party concluded, as it usually does, with the outgoing committee giving its approval for the work report that Xi Jinping will present at the 20th Party Congress, as well as for unspecified amendments to the party’s constitution. What is more remarkable is the near absence of informed leaks about the personnel changes and policy direction that will come forth when the 20th Party Congress opens in Beijing on October 16. This silence underscores the extent of personalistic rule and authoritarian control that Xi has developed. A once predictable political system with norm-bound succession rules has been replaced by the uncertainties that inevitably arise when individuals dominate.To get more news about
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The 20th party congress of the Communist Party of China (the party congress) was held in the week of 16 October 2022. With widespread news coverage already made about the meetings – and with a particular focus on President Xi’s work report and the new formation of the Politburo Standing Committee – now is probably the time to look at their investment implications.
The party congress is a political gathering of senior representatives from the Communist Party of China (CPC), which was founded in July 1921 and is now more than 100 years old.
As the country’s ruling party, the CPC had over 96 million members at the end of 2021, which is more than the combined population of Canada and Spain.
The party congress, held once every five years, attracts most people’s attention, as it usually sets the path of development for the party leaders and the country.
One of the most important events to watch this time was the election of the Politburo Standing Committee (PSC), which is the party’s most senior body. This was first unveiled after the conclusion of the party congress (and in the first plenum).In a widely expected move, President Xi was re-elected to the PSC as the General Secretary, representing his third consecutive term and indicating a strong sign of policy continuity.
President Xi’s opening speech and work report have largely summarized the achievements in the past years and outlined some key objectives for the future. These objectives include prioritizing the development of education and self-sufficiency and strengthening technology, among others.
However, the work report focused on structural and schematic issues. Hence, anyone attempting to search for the direction of the country’s anti-Covid policies and their economic implications (or any specific details) may find that quite stretched. As one sell-side analyst has written, the “analysis of the wording [of Xi’s report] is like reading tea leaves”.
That said, one way to analyze the party congress is to count the number of word mentions (Figure 1). This year, it doesn’t come as a surprise that the most mentioned word is “development”, which also appeared frequently in the work report. While we expect “development” to remain China’s top priority, policy direction could also focus more on “technology”, which has seen a tremendous pickup in terms of mentions.
We believe the party congress reinforces the stability of leading powers and policy continuity in China. These are considered vital to counter the significantly changing external environment and ensure the country remains on track to achieve long-term quality growth.
That said, technology in China will remain under the spotlight as a key pillar of China’s economic modernization. Statements made during the party congress suggest this, such as “technology is the first productivity and innovation is the first power”, and “accelerate the implementation of innovation-driven development strategy”. This indicates that technological innovation in China, as represented by the increased R&D spending, will remain a focus of the ruling party. According to World Bank data, China’s R&D spending as a percentage of GDP has continued to rise through the last two decades, although it is still behind other developed countries(Figure 2). This trend is likely to continue and, coupled with China’s growing economic scale, could support the country’s transformation towards an innovation-driven and modernized economy.
