Update as at 24 October
Since this article was published, the Party Congress concluded on Saturday 22 October with the formal announcement of the members of the 20th Central Committee for 2022 – 2027. On Sunday 23 October, the Central Committee elected from its constituents the members of the new Politburo and the Politburo Standing Committee (PSC), the top two decision-making bodies within the CCP. The four newly appointed PSC members – like the two existing members that remain in place – are allies of Xi Jinping. This marks a deviation from the past where the PSC has had representation from different factions of the CCP. The key takeaway is that – like the Work Report – the signs point to no imminent departure from current policy direction.
Under an intense spotlight
All eyes were on China on Sunday (16 October), as President Xi Jinping opened the 20th Party Congress – an event which takes place every five years.
This year’s event garnered heightened interest among global investment market participants, reflecting the numerous global and domestic developments they have had to navigate since the 19th Party Congress in 2017 – many of which remain at the forefront of people’s minds today.
First on the agenda was Xi’s delivery of the Work Report of the 19th Central Committee (comprising the most senior members of the Communist Party of China), summarising the main achievements over the last five years and setting out the broad direction for policymaking over the next five years and beyond.
No major surprises
The upshot for investors is that policy continuity appears to be the overarching theme, and hence there was not much in the way of significant surprise. Key takeaways are:
- Economic growth still features as the backbone to China’s policy roadmap; the core task of the Party is to develop China to be a strong, modern socialist country by 2050.
- There is a greater focus on innovation and security, which is not a major surprise given developments that have unfolded over the last few years.
- Those looking for some backtracking on key policies relating to COVID or a major ramp-up in property market support are likely to be rather disappointed, although it was always unlikely that the Work Report would go into the detailed specifics. Key to watch on this front will be the upcoming Politburo meeting in November and then the China Economic Work Conference in December.
Bond market implications
We do not expect the Work Report to have a major impact on the China fixed income market asset class, meaning our views and positioning remains unchanged.
Equity market implications
The Work Report helps mitigate prior market concerns around China potentially moving away from its growth objectives, although specific policy measures will only be announced over time post the event. Experience tells us that any impact on the real economy will take time to play out and the implications for individual companies will need to be assessed on a case-by-case basis. In conclusion, we do not expect the Work Report to have a major impact on the China equity asset class, meaning our views and positioning remain unchanged.
General risks
All investments carry the risk of capital loss.
