The Congress of the Chinese Communist Party takes place at a crucial moment

The upcoming Congress of the Communist Party, held every five years, falls on October 16. The twentieth such congress is to give President Xi an unprecedented third term and provide the basis for his party to outline future political plans. Congress is taking place at a crucial moment: China's slow post-covid economic recovery is threatened, geopolitical tensions are significant, and the US and Europe are sliding into recession. The last Congress took steps to reduce risks to the economy, slow down growth and adopt "common prosperity." For many, it was a bitter pill to swallow - now it is counted that politics will take a pro-growth direction that will stabilize prospects and support other countries, from Europe to Japan.

FORECAST

Major policy changes are unlikely, and the broader macro profile is unlikely to change. Most of the attention will be devoted to changes in the composition of the Politburo's seven-member standing committee, with room for a slight growth-oriented economic policy. China still has more control over its destiny than most countries thanks to its self-imposed zero-covid strategy, low inflation, positive real interest rates and fiscal flexibility. However, China also faces unique political challenges, ranging from an oversized real estate sector to severe demographic difficulties to a slowdown in global commodity demand. China has provided a third of global economic growth in recent years, making the recent slowdown to its lowest level in three decades is shocking. However, the growth rate CBA still remains many times higher than in developed countries.

MARKET

The domestic backyard-oriented Chinese stock market is the second largest and one of the cheapest in the world and has fallen out of favor. Local Actions (MCH) had a difficult five years, lagging behind other major regions. The reason for this state of affairs was, among others a weakening boom on the technology market and stricter sector regulations. However, Chinese stocks have been doing better lately as the intensity of regulation has decreased. The ADR withdrawal transaction was also completed, and the authorities rejected the global trend and eased monetary policy.

About the author

Ben Laidler - global markets strategist in eToro. Capital investment manager with 25 years of experience in the financial industry, incl. at JP Morgan, UBS and Rothschild, including over 10 years as the # 1 investment strategist in the Institutional Investor Survey. Ben was the CEO of the independent research firm Tower Hudson in London and previously Global Equity Strategist, Global Head of Sector Research and Head of Americas Research at HSBC in New York. He is a graduate of LSE and Cambridge University, and a member of the Institute of Investment Management & Research (AIIMR).