Asia St: Uncertainty Looms as China Looks to Next Party Congress

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Uncertainty Looms as China Looks to Next Party Congress

March 16, 2022

A previous session of the National People’s Congress (Photo Credit: Wikimedia Commons).

BGA’s China team, led by Senior Advisor Haiying Yuan, sent an update to clients on the conclusion of China’s National People’s Congress (NPC). The update examined the current context of China’s political and economic situation, indicators to watch and future implications for companies as Beijing looks to the upcoming Party Congress towards the end of 2022.

Context

  • During the National People’s Congress (NPC), which concluded on March 11, Chinese leaders sought to instill confidence in China’s economic stability and growth outlook for the upcoming year.
  • Nevertheless, market and public sentiment seem to be following last year’s bearish trend. China’s “dynamic zero-COVID” strategy and foreign policy hit major stumbling blocks following the close of the legislative session last week, leading to major sell-offs in the Chinese stock market despite relatively strong economic performance so far in 2022.

Significance

  • Much of the uncertainty surrounding the NPC comes from the Party’s known preference to maintain stability at all costs and the unclear outlook for the upcoming 20th National Congress, arguably China’s most consequential recurring political signpost.
  • The NPC’s conclusion comes amid the lingering prospect of leadership changes that are imminent in China. Most notably, Premier Li Keqiang announced on March 11 that he will step down as Chinese premier next year.

Implications

  • The NPC suggested government scrutiny on certain sectors for companies to monitor, though specificity remains unclear. The government said it “will strengthen the regulatory responsibilities of governments and ensure… governments fulfill their regulatory responsibilities for matters under their jurisdiction, to prevent any absence of regulation.” Other passages referenced combating the monopoly position of tech firms and the “disorderly expansion of capital,” reinforcing speculation that regulators have not finished probing.
  • Pandemic management is likely to continue to be top of mind. China’s zero-COVID strategy has been put to the test, and the omicron variant has pushed daily case numbers to their highest level since the earliest days of the pandemic.

BGA will continue to keep you updated on developments in China as they occur. If you have any comments or questions, please contact BGA Advisor Eric Wang at ewang@bowergroupasia.com.