The China Briefing

Update on Party Congress

Please find below our latest thoughts on China:

  • The market reaction to the conclusion of China’s Party Congress is telling. The Hang Seng China Enterprises Index (a gauge of key China stocks listed in Hong Kong) fell more than 7% on the first day of trading after the Congress. The CSI 300 (onshore China’s equivalent of the S&P 500) as well as the broader Shanghai and Shenzhen stock exchanges saw a far more muted reaction.1
  • These moves reflect a significant difference of opinion regarding China’s new leadership team.
  • Within mainland China, there is a view that going forward policy implementation will become more efficient and executed with less friction as personnel issues related to political roles have been settled.
  • In addition, while the apparent new number two in the government, Li Qiang, has recently been in the headlines due to his handling of the Shanghai lockdown, he previously had a reputation of being a more pro-market politician. For example, he oversaw the establishment of the technology-based STAR market, and also the construction of the Tesla factory in Shanghai, which took just 10 months.
  • In contrast, offshore markets have moved to price in a higher risk premium, especially given the greater concentration of power.
  • To summarise the key personnel changes – at the top of the political tree is the Politburo Standing Committee (PSC) consisting of seven people. There are four new appointees. And the next level down is the Politburo consisting of 24 people (including the PSC), where there are 15 new members.
  • The turnover levels are consistent with previous cycles, although clearly most of the PSC and Politburo members have worked with Xi Jinping closely in previous parts of their careers.
  • The list of the wider Central Committee also points to a reshuffle of Beijing’s economic policy leadership. Liu He, who previously headed the economic finance team, as well as the banking regulator and the PBoC governor will retire from government roles at the National People’s Congress next March.
  • During the Party Congress there were no major policy announcements. The lack of policy detail was not surprising as the Congress is about long-term targets and strategy, not about short-term policy adjustments.
  • In Xi’s opening speech, he reiterated that “development is the top priority for the Party” and included the target that, in 2035, China’s GDP per capita would reach that of a “medium-level developed country”. Although the growth threshold was not specified, from Xi’s previous speeches this is likely to approximate to a doubling of GDP per capita from 2020, which would require average annual growth of 4.7% in 2021-2035.
  • The word “development” has a number of different aspects. For example, it includes prioritising sustainability of growth as well as the actual growth rate. As such, national security, technology development and the green transition were central themes in the speech. A notable phrase was “Chinese people must hold their rice bowls firmly in their own hands”, signaling the importance of food self-sufficiency and security.
  • For the foreseeable future, we expect a continuation of the trend towards a more policy-driven environment with a focus on increasing domestic consumption and upgrading the manufacturing sector to sustain future growth.
  • Looking ahead, the next Politburo meeting and the Central Economic Work Conference will be held in December and will set out more details regarding policy direction. These will be important in helping to rebuild confidence in the macro outlook, which remains a key driver of markets.

1 The Hang Seng China Enterprises Index (a gauge of key China stocks listed in Hong Kong) fell more than 7% on the first day of trading after the Congress. The CSI 300 (onshore China’s equivalent of the S&P 500) as well as the broader Shanghai and Shenzhen stock exchanges saw a far more muted reaction. Source: Bloomberg, 24 October.

  • Disclaimer

    Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Foreign markets may be more volatile, less liquid, less transparent, and subject to less oversight, and values may fluctuate with currency exchange rates; these risks may be greater in emerging markets. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

    The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

    This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.

    This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; ; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK)


Allianz Global Investors

You are leaving this website and being re-directed to the below website. This does not imply any approval or endorsement of the information by Allianz Global Investors Asia Pacific Limited contained in the redirected website nor does Allianz Global Investors Asia Pacific Limited accept any responsibility or liability in connection with this hyperlink and the information contained herein. Please keep in mind that the redirected website may contain funds and strategies not authorized for offering to the public in your jurisdiction. Besides, please also take note on the redirected website’s terms and conditions, privacy and security policies, or other legal information. By clicking “Continue”, you confirm you acknowledge the details mentioned above and would like to continue accessing the redirected website. Please click “Stay here” if you have any concerns.