Prelude to the 20th Chinese National Congress – Economic Analysis

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The 20th National Congress of the Communist Party of China, which will convene in the second half of 2022, is expected to chart the course for China’s next phase of development. Its prelude comes at a time of unprecedented challenges to stable economic growth stemming from global and national landscapes.

For much of the past two years, China has had an enviable record of keeping the pandemic at bay through its zero-COVID strategies. Nonetheless, the first half of 2022 saw China succumb to the rapidly spreading Omicron variant, with lockdown measures imposed in major manufacturing hubs such as Shanghai, Shenzhen and Dongguan, disrupting global supply chains and stagnating domestic consumption. Macroeconomic uncertainties are further exacerbated by high-profile defaults by debt-ridden Chinese property developers, starting with Evergrande and Shimao, with analysts forecasting a default rate of almost a third in China’s once-hot property market. Global factors, including rising US interest rates, US sanctions on Chinese companies’ supply chain, and soaring food and energy prices resulting from the Russian-Ukrainian war, also cast doubt on China’s ability to meet its exceptionally modest GDP growth target of 5.5% for 2022. Amid external and internal challenges, China remains committed to the new philosophy embodying the resounding themes of “innovative, coordinated, green, open and shared growth”.

At a senior leadership meeting in June 2022, Chinese President Xi Jinping (President Xi) approved a plan for the healthy development of mobile payments and fintech platforms, striving to strengthen oversight of these platforms to prevent systemic financial risks while encouraging platform operators to play a greater role in supporting the Chinese economy. This softened official stance on the fintech industry appears to represent a step back from regulatory repression, beginning with Chinese authorities abruptly ending Ant Group’s proposed dual listing in Hong Kong. and Shanghai, which was poised to become the world’s largest IPO at the end of 2020. and, more recently, with Didi being delisted from the New York Stock Exchange due to data security concerns. The central bank’s expected approval of Ant Group’s IPO relaunch coincides with the looming financial troubles in China’s property market and is the latest sign of China’s bid to capitalize on the housing industry. once-thriving financial technology to achieve its ambitious economic growth with the objective hindsight in a year of significant transition for China, with President Xi set to be re-elected for an unprecedented third term.

In order to revive the once-booming real estate market and stimulate population growth, the Chinese authorities are trying to provide incentives to stimulate consumer demand by lowering mortgage rates and offering preferential policies for the purchase of property. a house for families with two or three children. Analysts remain skeptical about the effectiveness of such policies in reversing the real estate developer debt crisis in the short term and preventing contagion effects from the real estate sector (which accounts for about a quarter of China’s GDP) to other sectors of the economy. economy already affected. by the latest wave of COVID restrictions. It is expected that as the Chinese economy emerges from the mortgage default crisis, it will no longer be able to employ an economic growth model driven by highly leveraged real estate and infrastructure projects. and speculative.

In a virtual keynote speech titled “Keep abreast of the Trend of the Era to Shape a Bright Future”, delivered by President Xi at the opening ceremony of the BRICS Business Forum in June 2022, President Xi addressed the choices of the time in the global context. the recovery of the economy after major setbacks caused by drastic changes and a pandemic unprecedented for a century. President Xi stressed the need to “embrace solidarity and coordination and jointly uphold world peace”, “jointly promote sustainable development” and “jointly pursue win-win cooperation” at this critical juncture in order to prevent a global economic crisis. He further reiterated China’s commitment to the new development philosophy of achieving high-quality development and condemned the politicization of the global economy and the “deliberate imposition” of sanctions by major developed countries to the detriment of themselves and others.

President Xi also hosted the High-Level Dialogue on Global Development to steer global development towards a new era to bring benefits to all; President Xi reiterated China’s commitment to spearheading a global development paradigm characterized by “benefits for all, coordination, inclusiveness, win-win cooperation and common prosperity” by providing continued support for the 2030 Agenda for Sustainable Development. China will transform the South-South Cooperation Assistance Fund into a Global Fund for South-South Cooperation and Development, adding $1 billion to the fund in addition to the $3 billion already committed, and will increase contributions to the United Nations Trust Fund for Peace and Development. President Xi also expressed China’s willingness to work with all parties on global issues such as poverty reduction and eradication, sustainable development, vaccine delivery and innovation, and production. and food supply in the pursuit of global prosperity.

China’s diplomatic stance of moving away from the old Cold War mentality amid escalating tensions in China-US relations and ushering in a new stage of balanced, coordinated and inclusive growth echoes the long-established concept of China’s peaceful rise coined by former Chinese President Hu Jintao. Going further than his predecessor, President Xi recognizes China’s responsibility for world development and peace in the face of thorny challenges such as the COVID-19 pandemic and regional conflicts. In fact, China’s strong promise recalls the basic 14-point policy underlying Xi Jinping’s thinking on socialism with Chinese characteristics for a new era (Thought of Xi Jinping) which, among other things, emphasizes the importance of adopting a people-centered approach for the public benefit and establishing a common destiny between the Chinese people and other peoples of the world in a peaceful international environment, the theme under underlying being the absolute leadership of the Chinese Communist Party. From the Belt and Road Initiative and vaccine diplomacy to its recent commitment to advancing global prosperity, China is seeking to prove by example that the liberal US-led global order does not is not the only viable world order conducive to global development. It remains to be seen whether Xi Jinping thought can play a central role in the new world order.

On its way to post-COVID recovery, China should strive to spearhead the new development philosophy with the aim of enhancing social stability, fostering sustainable economic growth, and enhancing sovereignty and China’s leadership role in the new world order that will deliver. state legitimacy to the Communist Party of China as it ushers in the 20th National Congress which will see major shake-ups in the central leadership and development roadmap for the next five years.

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