Beyond a third term, Xi needs to tackle economic slowdown 

THE Chinese Communist Party (CCP) will hold its 20th Party Congress on Oct 16, when President Xi Jinping is expected to secure an unprecedented third 5-year term as party leader. Many will be watching, in the appointments of key personnel who will join Xi in leading China for the next 5 years, for hints of the president’s vision for the future, as well as domestic and foreign policy direction. Who will lead the economic team after Premier Li Keqiang, the country’s number 2 since 2013, steps down when his term expires next March will also be of key interest. 

So far, the economic data heading into the congress has not been great. Even as Xi has his sights set on his grand vision for China, he faces the more immediate, arduous task of ensuring the economy recovers. The country’s zero-Covid policy, which has shut borders for more than 2 years, continues to be a subject of conjecture and intrigue. Investment banks have slashed their forecasts for China’s 2022 gross domestic product growth to below 3 per cent, even as Beijing sticks to its 5.5 per cent aspiration. China’s economic recovery remains fragile as long as persistent Covid-control restrictions disrupt businesses and sentiment stays weak. The costs of these control measures have already emerged during the mid-autumn festival, which saw a deep contraction in tourism revenues, passenger trips and new home sales. Meanwhile, much of the rest of the world have opened up and moved on with endemic Covid. For China however, with the heightened risk of Covid contagion during the coming winter, the Chinese New Year season next January and the National People’s Congress annual gathering in March 2023, Covid curbs are unlikely to be relaxed. On the contrary, Beijing could extend or reintroduce stringent measures after the October congress. 

In recent weeks, China has issued 19 policies to help stabilise the economy, promising more growth-supportive measures. The new policy package includes 300 billion yuan (S$60.5 billion) of quotas for policy and development financial tools, 200 billion yuan in quotas for bond issuance for state-owned power generating companies, and 10 billion yuan of subsidies to agriculture. In Zhengzhou, the heart of mortgage boycotts and suspended property construction projects, local governors vowed to restart all suspended property construction projects within one month. This could help mitigate homebuyers’ concerns, provide support for construction activity and bolster market sentiment. But execution is key. At this point, these may be too late and not enough to stave off the slower growth this year.