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China’s new leadership – What has changed?

This material is intended for Institutional Investors (as defined in the Securities and Futures Act, Chapter 289 of Singapore) only and is not suitable or intended for persons who do not qualify as such.

Four of the seven-member Chinese Politburo Standing Committee are new appointees. What are some possible implications of the change?

The 20th Congress of the Chinese Communist Party (CCP) concluded on 23 October and the new Politburo and Standing Committee members were confirmed a day later. They will be procedurally approved by the National People’s Congress in March 2023.

Policy & reform continuity

As expected, Xi Jinping remains as President, as well as Party Secretary and Army Chief (the two most powerful positions in the government). This means policy and reform continuity, with a focus on: 

  • Economic development to put China on a sustainable path
  • Making China a ‘moderately affluent’ society by 2035
  • The roles of both state-owned enterprises and private companies in structural reforms. 

Policy continuity reflects a stable government and should be seen as good news in the face of the current economic headwinds, wider policy uncertainty and rising geopolitical risks.

However, the Congress’ emphasis on macroeconomic policy prudence and housing policy (i.e., that houses are for living, not for speculation) implies that the current housing market weakness will likely continue to act as a drag on the economy in the near term and there is not going to be any massive policy easing after the Congress.

Beijing’s zero-Covid policy will also continue, although there may be minor adjustments to increase policy flexibility to lessen its impact on the economy.

President Xi’s position strengthened

The Congress showed that Mr. Xi’s core leadership power had been strengthened: 

  • He broke the two-term president limit of the Party constitution, and broke the implicit retirement age rule of 68 by appointing members in the Politburo and the Standing Committee who will pass the age limit in the next year or two.
  •  ‘Xi Jinping Thoughts on Socialism with Chinese Characteristics in a New Era’ were enshrined in the Party Constitution.
  • Mr. Xi also broke the Party’s conventional practice of appointing as premier someone who served as vice-premier before. Premier Li Qiang (replacing Li Kequiang) is not a vice-premier. He has been promoted in preference to two Standing Committee members, Zhao Leiji and Wang Huning, who served as vice-premiers before. 

Overall, Mr. Xi has surrounded himself with strong supporters, who are also reformers, in the nucleus of the power structure. This arrangement should guarantee policy and reform continuity. Till now there have been positive results under his leadership, notably progress in deleveraging and reducing corruption (Exhibits 1 and 2).

While there is a strong justification for Mr. Xi to re-centralise power to push through painful reforms (despite how the West looks at this), China and the world face ‘key man risk’ since Mr. Xi is the one who calls the shots.

Given Mr. Xi’s record of delivering reforms, we believe China deserves the benefit of the doubt in that it may be able to sustain long-term growth with higher quality by finding new drivers in a creative destruction process.

What’s new?

One important change is that the economic and finance team will be reshuffled, with Premier Li Keqiang, first Vice-Premier Han Zheng, Vice-Premier Liu He, central bank governor Yi Gang, CBIRC chairman Guo Shuqing and Finance Minister Liu Kun to be replaced by next March.

The new team, to be announced later, is expected to contain supporters of Mr. Xi’s economic and financial liberalisation policies.

Significantly, the Party is explicitly toughening its policy stance on securing national sovereignty, on Taiwan unification, Hong Kong’s one-country-two-systems approach, and military upgrading through technology enhancement. [1] At the Congress, the Party warned of dramatic changes (read rising geopolitical risk) in the world. This is in sharp contrast to the assessment in the 19th Congress five years ago that saw peace and development as the major global themes.

Innovation and security have now become development priorities. They echo Beijing’s ‘dual circulation’ policy [2] (in place since 2020) which emphasises education, technology and innovation to boost China’s long-term growth by enhancing productivity and preparing for intensified Sino-US technology competition.

Indeed, the US government has recently expanded the scope of its controls and restrictions on technology exports to China; the restrictions have been extended to talent flows and will probably involve investment flows later.

Fiercer competition in the tech sector could pose headwinds to China’s supply chain and industry upgrading. It could also hurt the outlook for the tech sector in the short to medium term, and slow down (but not derail) its progress.

Greater geopolitical tensions could make China more determined to improve self-sufficiency and supply chains in technology and advanced manufacturing. However, it can be expected to continue to open up its financial sector to benefit from international capital flows, as per the ‘dual circulation’ strategy.

Also read 20th China Communist Party Congress – The surprise of no surprises


[1] See reference in footnote 1.  

[2]Chi on China: China’s Dual Circulation Strategic Pivot to Counter External Exigencies and Global Demand Shift”, 16 September 2020. 


Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk. This material is produced for information purposes only and does not constitute: 1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. It does not have any regards to the specific investment objectives, financial situation or particular needs of any person. Investors should seek independent professional advice before investing, or in the absence thereof, he/she should consider whether the investments are suitable for him/her.

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