Key takeaways from China's 20th Party Congress and investment implications

China and Hong Kong stock markets have been unsettled after the National Party Congress conclusion’s lack of concrete measures to address the country’s economic slowdown and announcement of the new leadership line up in Beijing.

The new Politburo and Standing Committee are now made up of officials loyal to President Xi with little room for competing interests.

I believe markets may take a bit of time to digest the new political shake up in Beijing and whether there may be any forthcoming policies under the new leadership that could affect markets.

Key developments of the Congress 

Firstly, the further consolidation of leadership could mean a strict adherence to the party line, including the Zero COVID policy. Beijing’s top leader now has unmatched political leverage and could remain in power. The lack of a successor could mean a 4th term is already in the making.

This brings me to my second point. President Xi’s authority could certainly help him with pushing through his agenda and vision for China, which he made clear during the national congress.

President Xi is doubling down on a state led development model with a focus on national security and technology self sufficiency.

Still,the Standing Committee could have fewer divergent views such as the one outgoing Premier Li Keqiang had on balancing virus containment with growth as officials abide by official policy mandates.

All eyes will be on who are going to be appointed as the new economic policymakers at the National People’s Congress otherwise known as the “two sessions” in March 2023 Both Liu He, economic advisor and Yi Gang, central bank governor are stepping down.

Investment Implications

China’s economy is changing gone are the days when policymakers pursued growth at any cost. I believe there could be an era of consolidation as markets digest changing policy priorities.

Still, I believe that the market sell off is overdone and valuations for both Hong Kong and China stocks look compelling, especially for dip buyers.

What’s important to remember though is that the most important domestic political event in 5 years in China has concluded which means policymakers are likely in the near term to re focus on other priorities such as instituting more monetary and fiscal stimulus to stabilize growth.