Explainer: What to watch at the fifth plenum of China’s Communist Party


In this news, we discuss the Explainer: What to watch at the fifth plenum of China’s Communist Party.

BEIJING (Reuters) – Chinese President Xi Jinping and members of the Central Committee, the largest of the ruling Communist Party’s elite decision-making bodies, meet this week to formulate economic and social policy goals for the next five years .

The policy proposals will be discussed in the plenum, the fifth meeting of the Central Committee since the 2017 party congress, on October 26-29. The final draft will be approved and released when the National People’s Congress, or parliament, meets at its annual session next year.

Here are some things to watch out for during the fifth plenum:


China has abandoned its target for annual gross domestic product (GDP) growth in 2020 for the first time since 2002 due to uncertainty caused by COVID-19. The world’s second-largest economy is expected to miss its 2016-2020 GDP target by more than 6.5%. Investors are watching to see if China would set a more flexible growth target for the next five years, or not at all, to increase its policy options and flexibility.


Investors are awaiting details on how Xi’s “double circulation” strategy is implemented. Originally proposed by Xi in May, the strategy is for China to rely primarily on “domestic circulation” for its next phase of development – an internal cycle of production, distribution and consumption, supported by domestic technological innovation. This internal cycle must be reinforced by external resources through “international circulation”.


Market watchers are looking for possible new measures to spur technological innovation, which is essential for moving China forward in the global value chain and improving its self-sufficiency in vital technologies and know-how, especially with reducing the supply of United States in components to key Chinese technologies. companies such as Huawei Technologies Co [HWT.UL], threatening to disrupt Chinese supply chains. China is expected to step up political support for high-tech industries such as semiconductor development, telecommunications (5G), big data, and artificial intelligence.


Markets will look closely for signs of plans to increase strategic reserves of commodities and energy to ensure self-sufficiency, to boost food security after a deadly disease led to the rebuilding of pig herds and grain reserves, to decarbonize and accelerate the adoption of green energy, to push for energy independence and to strengthen its pricing power in commodity markets by launching new international contracts. [L4N2HH27E]


Economists expect China to roll out further measures to boost domestic consumption. To further boost GDP growth, domestic consumption needs to expand to include spending on higher-value goods and services and go beyond cars, food and clothing. The key to boosting consumption is increasing household income, which depends on the availability of better-paying jobs, especially in the technological and financial sectors.


China should further ease residence rules to facilitate the migration of people from rural to urban areas, help fill labor shortages in hundreds of cities at different stages of new industry development, and boost the consumption while reducing income disparities between rural and urban areas. . Land reforms would also allow farmers to get a larger share of land sales, which would encourage urbanization. In the financial sector, expected measures to further liberalize interest rates and expand the role of capital markets would address distortions in credit allocation that see huge state-owned banks lending to SOEs at the time. that the private sector is often deprived of credit.


Observers are waiting for further measures to deal with China’s aging population. In a previous plenum in October 2015, the party announced that it would abandon the decades-long one-child policy. In 2013, Beijing said the official retirement age would be raised by 2020, a target included in the 2016-2020 plan of the Ministry of Human Resources and Social Security. So far, no action has been taken to change the retirement age, 60 for men and 55 for women civil servants and employees.


Climate watchers say any plenary statement will likely contain harsher language on controlling greenhouse gas emissions, reflecting President Xi Jinping’s recent pledge to make China carbon neutral by 2060 Xi’s surprise announcement should lead to significant adjustments to the next one. five-year plan, with government-backed researchers calling for higher targets for renewable energy and tighter restrictions on coal use.


Seven plenums usually take place between party congresses, which take place once every five years, and the fourth plenum is often devoted to party governance. There was no mention at the last fourth plenum in October 2019 of a successor to Xi or of Xi’s retention in power at the end of his presidential term in 2022. A small handful of investors are watching again up close during this plenum, but it’s unclear if the topic will be discussed.

Reporting by Ryan Woo; Additional reporting from the Beijing press room. Editing by Gerry Doyle

Original © Thomson Reuters

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