Summary of China’s 20th Party Congress

China’s 20^th Party Congress concluded a couple of weeks ago and President Xi Jinping was confirmed as the general secretary for a third five-year term. Several new appointments of key members of the Politburo and Politburo Standing Committee were also announced and some prominent members of retirement age including Premier Li Keqiang stepped down. We will gain more clarity on new appointments of various economic officials in March 2023 during the annual “Two Sessions” meeting.

In the next five years, the following broad goals¹ were emphasized as part of the 20^th Party Congress work report:

• Improving self-reliance in science and technology; 
• Matching the growth of residents’ income with economic growth;
• Matching the increase in labor remuneration with the increase in labor productivity;
• Making basic public services more equal;
• Taking a step toward completing the multi-level social system; and
• Significantly improving the urban and rural living environment.

China’s overall development objectives shared at the meeting included strengthening the country’s economy and their scientific and technological capabilities in order to increase the GDP per capita, as well as growing the country’s per capita disposable income and middle-class as a share of the total population. The “dual circulation” concept was also reiterated, homing in on the importance of developing China’s domestic economy while also improving conditions to increase foreign investment and boost the manufacturing of exports.

The policy objective shared at the 20^th Party Congress around supporting the wealth creation of China’s middle class may be positive for investors looking to invest in China’s consumer segment in the long run. Officially, China’s National Bureau of Statistics has stated that China has around 400 million middle-income earners, representing less than one-third of the country’s overall population.²  However, this number is already larger than the total population of the U.S. and are a key segment for driving China’s domestic demand and dual-circulation model.

There is still much talk about the economic challenges China is facing including the impact zero-Covid has had on retail sales and employment not to mention the country’s real estate woes. There was no indication from the 20^th Party Congress of when or how China’s zero-Covid policy would be relaxed. Analysts argue however that a change to the Covid-related policies and the development of the country’s private sector are key in order to drive enough economic growth to enlarge China’s middle class.  

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

When investing in less developed countries, you should be prepared to accept significantly large fluctuations in value.

Investment in certain securities listed in China can involve significant regulatory constraints that may affect liquidity and/or investment performance.