Xi Jinping’s speech at the Party Congress: yes to covid zero, no to market reforms?

Hong Kong
CNN Business

Although China’s economy is plagued by problems From a housing crisis to youth unemployment, Xi Jinping offered no great ideas to get the country back on track during his tenure. two-hour opening speech at the Communist Party Congress on Sunday.

The Chinese leader is expected to secure a unprecedented third term at the one-week conference. The priorities presented at the political meeting of more than 2,000 party members will also set China’s trajectory for the next five years or even longer.

In his speech on Sunday, Xi struck a confident tone, highlighting China’s growing strength and growing influence during its first decade in power. He also repeatedly underlined the risks and challenges facing the country, including the COVID-19 pandemicHong Kong and Taiwan, all of which claimed that China had emerged victorious.

But experts worry that Xi has shown no signs of backing away from the country’s rigid zero-Covid policy or strict regulatory stance on various businesses, both of which have hampered growth in the world’s second-largest economy.

“Yesterday’s speech confirms what many China watchers have long suspected: Xi has no intention of embracing market liberalization or relaxing China’s zero-Covid policies, at least not any time soon,” Craig Singleton said. , China Senior Fellow at the Foundation for Defense of Democracies. a DC-based think tank.

“Instead, he intends to double down on policies geared towards security and self-reliance at the expense of China’s long-term economic growth.”

China is the world’s last major economy still enforcing strict zero-Covid measures, which aim to end chains of transmission through border restrictions, mass testing, lengthy quarantines and uncompromising quick lockdowns.

And China’s economy is in bad shape Growth has stalled, youth unemployment is at a record level, and the housing market is in shambles. The constant Covid lockdowns have not only wreaked havoc on the economy, but have also led to growing social unrest.

In the past week, two big banners they were hanged on an overpass of a major road in Beijing, in protest against Xi’s Covid policy and authoritarian rule. It was a rare protest against the country’s top leaders, indicating the frustration and anger among the public.

Many international organizations, including the IMF and the World Bank, have recently lowered China’s GDP growth forecasts for this year, citing Covid-zero as one of the main obstacles.

Xi, however, praised the government’s adherence to zero-Covid, saying it “has achieved significant positive results.”

Xi’s speech, a summary of the Communist Party’s work report or action plan, was similarly brief on concrete solutions to other challenges facing the economy in the near term.

“We believe the ongoing Party Congress may not be a turning point for major policy changes,” analysts at Goldman Sachs said on Sunday, adding that they believe China may not loosen its Covid restrictions until at least the second quarter. of 2023.

In the real estate sector, Xi stressed the need to provide affordable housing and curb speculative demand, but did not specifically mention the downturn in real estate, which it has become a major crisis in recent years, threatening both economic and social stability.

“We stand by our view that a comprehensive solution to the beleaguered real estate sector may not come until after March 2023, when the political reorganization is fully complete,” Nomura analysts said on Monday.

Xi also did not mention record youth unemployment, which is mainly the result of his year-long crackdown on the tech industry in the context of punishing zero-Covid policies.

In the full version of the official work report of the 20th Party Congress, that was published Shortly after his speech, Xi stressed the need to continue the “antitrust” crackdown on the party and regulate “excess revenue,” a sign that he will continue to be tough on the party. big business Y healthy individuals

Beijing’s radical crackdown on the country’s private sector, under the banner of Xi “common prosperity” campaign, has hit a number of companies in sectors ranging from technology and finance to gaming and private education.

The government has defended the campaign as necessary for “social justice” and narrowing income gaps.

In his speech, Xi also made it clear that development was the “top priority” and emphasized continued focus on “high-quality growth.”

That may allay some market concerns that the government no longer cares much about economic growth, analysts at UBS said.

However, to achieve Xi’s goal of making China a “middle-developing country” by 2035, the country’s real annual GDP growth needs to average about 4.7% a year from 2021 to 2035, analysts said. UBS. That could be “pretty challenging,” they noted, adding that they expect China’s potential growth to average between 4% and 4.5% a year this decade, and fall lower after 2030.

Meanwhile, a comparison between this year’s speech and the last one delivered by Xi in 2017 at the 19th party congress revealed a potentially worrying trend.

The frequency of use of words such as “security”, “people” and “socialism” in 2022 had increased compared to 2017, while that of “economy”, “market” and “reform” had decreased, Goldman analysts said.

The change was also noted by Nomura analysts, who said it could point to “a change in the party’s mandate.”

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