China's Top Three Priorities

Above the Noise

China's Top Three Priorities

China has been grabbing headlines due to the recent elimination of fixed terms for the President and Vice President, as well as the government’s intervention in a number of large-scale local businesses. However, there are other developments which will have a more tangible impact on the economy, that have received much less attention.

China has been grabbing headlines due to the recent elimination of fixed terms for the President and Vice President, as well as the government’s intervention in a number of large-scale local businesses. However, there are other developments which will have a more tangible impact on the economy, that have received much less attention. 

Back in October at the 19th Party Plenum, President Xi Jinping set out three key priorities for the next 10 years:

·         Improving the quality of life of Chinese citizens

·         Improving the environment in China

·         Addressing financial risk

On the first, Beijing has been working to develop mechanisms to help the disadvantaged poor in terms of healthcare and education – efforts that are central to sustainable development. On the second, Beijing has been focused on tightening inspection and enforcement of existing regulations on environment protection. Indeed, following the US withdrawal from the Paris Agreement last year China has stepped up to claim global leadership, and this will likely entail an accelerated decarbonisation of what is still a coal-heavy energy system.

On the third point, the Xi administration has been taking robust and pragmatic steps to reduce the amount of debt, both at municipal government and private sector level. The above-mentioned clampdowns – including of Anbang Insurance and energy giant CEFC – are evidence of a more direct approach. We believe that this more assertive policy will make significant inroads into the reduction of debt held by private sector companies, probably via the resale of foreign assets.

Ultimately, China has clearly set in motion some highly consequential policies, demonstrating strong commitment to all three priorities. For investors the implications are positive as these specific areas have been sources of worry, due to the potential negative impacts they could have down the line.

 

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