What CPC party congress this week means for growth

Chinese President Xi Jinping delivered a speech on Sunday outlining the Chinese Communist Party’s priorities for the next five years.

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BEIJING — China’s twice-decade leaders meeting this week has significant implications for which parts of the economy will face support or sustained pressure, analysts at Natixis said on Thursday.

Chinese President Xi Jinping delivered a speech on Sunday outlining the Chinese Communist Party’s priorities for the next five years. An official version of that report is expected to be released after the party’s 20th National Congress ends on Saturday.

The impact of Congress on various sectors “is a major boost for industrial policy,” said analysts at the French investment bank. They pointed to Xi’s frequent mention of the need for innovation.

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“The green transition and semiconductors will continue to benefit,” they said.

China has announced that it intends to reach its CO2 peak in 2030.

What it means for technology and real estate

Tensions with the US have escalated in recent years, most recently with new US export controls this month targeting China’s chip industry.

“The most worrying thing from a Chinese perspective is that these restrictions are becoming increasingly difficult to circumvent,” said Gary Ng, senior economist for Asia-Pacific, Thematic Research at Natixis, during a webinar. “From an industrial policy perspective, China will increase its subsidies, strengthen its support.”

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Ensuring national security, particularly on food and energy, was another theme Xi reiterated in his speech.

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“The focus on national security points to the continuation of the zero-Covid policy and pressure on internet platforms,” ​​the Natixis analysts said. “Real estate will continue to come under pressure as there was little talk of easing in the speech.”

Real estate, which accounts for about a quarter of China’s GDP, has struggled as home sales have plummeted this year amid Beijing’s crackdown on developers’ high reliance on debt.

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In his speech, Xi also stressed China’s focus on “modernization,” which would include “high-quality development” and shared prosperity — moderate prosperity for all, not just a few. Xi also spoke of promoting a “healthy” online environment.

Analysts have linked China’s crackdown on internet companies over the past year to policymakers’ renewed emphasis on shared prosperity.

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Future growth depends on Covid

However, Xi did not say whether the country’s strict Covid policy would end or continue.

China’s Covid controls helped the country quickly return to growth in 2020. But controversial controls over business and social activities have been tightened this year, prompting investment banks to repeatedly cut growth estimates for China.

“China’s economy in 2023 depends heavily on whether it will open up,” said Alicia García Herrero, chief economist for Asia Pacific at Natixis, during the webinar.

This week, China’s national statistics bureau suddenly delayed the release of third-quarter GDP and other data originally due Tuesday morning.

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