Event

The Communist Party’s 19th National Congress, China’s most important political event, has just been held in October to appoint a new Politburo and Standing Committee. It will be remembered as having consolidated President Xi Jinping’s power as Party leader. On this occasion, Xi Jinping made history by being the first living Party leader to have his “Thought” enshrined in the Party charter (alongside that of Mao and Deng Xiaoping). His Thought consists in a national rejuvenation policy for China for a new era after “one and a half centuries of humiliation”, to make China a more spiritual, modern, self-confident, developed and militarised country in the next decade. Xi made it clear that, during this new era, the Communist Party will firmly remain the essential pillar for achieving the ambition of making the Chinese model and nation more influential worldwide.     

Impact on country risk

The National Congress has further highlighted Xi’s unique concentration of powers, which he increased during his first term, notably through the wide anti-corruption campaign and tightened control over Chinese society. The new composition of the core Politburo Standing Committee, welcoming 5 new members out of 7, allows Xi’s power to be counterbalanced slightly as they represent the different Party factions. Still, the fact that they will all be too old to succeed Xi within five years leaves the succession race open. A third term for Xi cannot be ruled out (which would be a first and would also require a constitutional change). Whatever happens, Xi should remain very influential within the Party for the rest of his life through his Thought. Despite a largely renewed leadership within the Standing Committee, Xi Jinping is expected to ensure continuity in policies, particularly in pursuing the anti-corruption programme. Economically, the focus was placed once again on quality and efficiency rather than quantity (which might explain why long-term growth figures have no longer been mentioned explicitly). Yet, the key socio-economic stability will be maintained and will still sporadically justify pro-growth measures. In the next five years, the main aims will be to tackle overcapacities and huge corporate debt, while accelerating the development of high technology and widening the social security net. Also, the liberalisation of State companies will remain contained and limited whereas reducing environmental degradation has become a high priority for the Party’s credibility. A big question is whether Xi will stick to his gradual and cautious approach to reforms which has contributed to an increase in the magnitude of risks (especially for debt) that China faces. Through his nationalist policies, his political power will also translate into a more influential dominating China abroad, economically via Chinese national champions and the OBOR (One Belt One Road), and geopolitically in the South China Sea and where China’s growing interests have to be defended and promoted (particularly around the New Silk Road).

Analyst: Raphaël Cecchi, r.cecchi@credendo.com