Can China Make Big Changes?

Can China Make Big Changes?

2022-11-22 • Updated

On Sunday, October 16, the 20th Congress of the Communist Party of China will take place. This rare event occurs every five years and plays a significant role in the world’s second largest economy. Let’s discuss why this event is worth following.

About the event

The 20th National Congress of the Communist Party of China (CCP) is convened on Sunday in Beijing. The event, which occurs every five years and usually lasts a few days, includes announcements and resolutions and eventually unveils a new Standing Committee, a small group of 25 core leaders in the Politburo. Traditionally, the top leadership is chosen at the party congress, including the General Secretary and Prime Minister.

The main questions that the party will discuss are:

  • Economic issues and future policy.
  • The analysis of top leaders’ results.
  • The domestic policy prospects.

The decisions that the party will end up with can also influence other spheres.

  c1f1f16e1b45a3aeb4b432e203cf8ccd.jpg

The 19th Congress of the Communist Party of China, October 18, 2017.©XINHUA

What is expected?

The main thing that people are waiting for is the news about Xi Jinping’s leadership. It’s believed that he will be re-elected for a 3rd term in office. Under his leadership, many complex problems were solved that remained unresolved for a long time. For example, a the significant success was achieved in the fight against corruption, which was consolidated everywhere.

Then, the party should discuss several economic issues. Economic growth has been hampered by an intensifying trade and ideological battle with the United States that sometimes threatens to escalate into actual conflict. Also, due to the Russian-Ukrainian conflict, big Chinese businessmen and bankers are willing to occupy the niches in Russian businesses that have opened up after the departure of Western firms. However, they act cautiously, fearing falling under secondary US and EU sanctions.

Another essential problem to discuss is Covid-19. Many of the Chinese hope that China will move away from the "COVID zero" policy as it dramatically delays supply and production. Top management is aware of the economic costs but so far, it has been reluctant to change course. The Chinese government mentioned overall planning, which coordinates COVID-19 epidemic prevention and economic and social development but also insisted on normalizing China's measures to combat COVID pretty strictly. However, the past year has shown that these goals directly contradict each other, and continuing the current course of epidemic prevention will inevitably sacrifice economic stability and development.

What about the Chinese Yuan?

Possible changes in domestic policy can significantly affect the national currency. The yuan has also been under pressure from the rising dollar lately and has reached highs in the past six months. USDCNH broke through the psychologically impressive level of 7, marking a significant technical development for the currency pair.

USDCNHDaily.png

Conclusion

This rare event may be a dark horse in today’s world situation, as changes in Chinese politics can influence CNH pairs and stocks. Follow it, and gain fundamental analysis skills.

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