october: uniting the front

the unity ticket

roundup from our portfolios

The stern tone of the 20th Party Congress and the tightening unity around ‘Comrade Xi Jinping as the core’ was amplified by the Central Discipline Inspection Commission—the rising internal Party enforcer. Its spokesperson Chen Jian 陈剑 warned that while ‘irrational expansion of capital’ remains a target, officials are as capable of violations as entrepreneurs. This underscored that Party cadres will be under ever stricter surveillance.

Read our take on the main policy takeaway—'common prosperity'—in the analysis below.

Trade and economic data for September were delayed, only coming out on 24 October; nothing was to rain on the Party Congress parade. Against contracting global demand, exports grew by 5.7 percent y-o-y, while import growth stayed flat, increasing at just 0.3 percent y-o-y. Container throughput across major PRC ports has dropped by 24 percentage points from July to October, along with plummeting container shipping fees.

Across the country, over 200 trade fairs scheduled in October were cancelled or delayed to H1 2023; pandemic control ratcheting up will continue to disrupt this major channel, relied on by traders for client pitches. The volatile RMB and rising dollar-denominated prices bring extra pressure, forcing importers to cancel orders.

GDP grew by 3.9 percent y-o-y in Q3, 3.5 percentage points up from Q2; it was driven mainly by boosting infrastructure investment. Consumer spending refuses to budge much; September retail sales growth slowed by 2.4 percentage points from August. The real estate market still struggles to recover, although sales data of commercial housing showed signs of life in September, while land sales sagged. The Party Congress failed to signal any changes in real estate policy and financial restrictions on housing developers persist.

The urgent tone on food security, rural revitalisation and sustainability at the Party Congress reassured some. But amid a slowing national economy and weakening demand, prospects are bleak for rural development pressuring policymakers into raising public spending on infrastructure. Rural construction projects will be kickstarted in batches this year, underpinned by hopes of economic recovery. Recalling this summer’s drought adds urgency to irrigation projects.

Beijing's commitment to decarbonisation was reaffirmed at the Party Congress. Xi called for carbon peaking and neutrality to be ‘active’ but ‘stable’. Economic downturns are not expected to pump up emissions. Beijing is promoting green stimulus, extending the NEV (new energy vehicle) purchase tax exemption to late 2023, much to the industry’s relief.

In his Political Report, the General Secretary again prioritised scitech, innovation, and ‘talent’, emphasising self-reliance. The PRC must accept scitech as the primary productive force, ‘talent’ as the primary resource, and innovation as the primary driver of growth. Several top scientists have been named to the Central Committee. Education has been accorded strategic importance, now tasked with training a highly skilled and innovative workforce.

While Beijing fretted over preparations for the Congress, Shanghai municipality, keen to lead the way on tech self-reliance, issued an action plan on 11 Oct 2022 to build ‘industries of the future’ in clusters. It would cultivate innovative enterprises and human resources in such fields as health, smart tech, energy and materials, hosting 1,000 hi-tech firms with a combined output of some C¥500 bn by 2030. Several cutting-edge tech industry clusters should be in place by 2035.

Reducing child-rearing costs was one of Xi's sweeteners at the Congress, more pronatal policies to come was another major pledge. Coping with the ageing population was a related item on the Chairman's list of policy challenges: the clock is ticking for Beijing to gear up aged care. Released on 12 October, new guidelines on providing in-home care for older citizens target the most vulnerable, including the ‘left-behind elderly’ whose family members, often working far away year-round, cannot offer traditional forms of support.

disorderly expansion of capital 资本无序扩张 zīběn wú xù kuòzhāng

riding too far from the Centre

Typically targeting monopoly behaviour, this buzz-phrase was flagged at a December 2020 Politburo meeting, then listed by the Central Economic Work Conference among eight key tasks for 2021. A euphemism for ‘high-risk’, firms are deemed ‘disorderly’ when their scale stifles innovation, harms consumer interests and swings public opinion via social media subsidiaries. 
Warnings against 'disorderly expansion' were reiterated by the Central Discipline Inspection Commission at the 20th National Party Congress (October 2022). There was marked switch in focus from entrepreneurs (e.g. Alibaba's Jack Ma) to senior Party cadres.
The illustration depicts an unidentified capitalist driving unruly horses labelled 'investment', 'consumption' and 'exports' (of capital).

featured analysis

unanimity holds sway

coming scramble for common prosperity

Common prosperity has emerged from the 20th Party Congress as the core of neo-socialist policy for Xi’s New Era. Now elevated to a received truth in the Constitution, it flags the direction of the political wind underscoring the shift to economic management via Party structures, to cadres rather than professionals or entrepreneurs. full post open access →

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october policy movers

policy professionals in and out of the establishment

Wen Tiejun 温铁军 | Southwest University, Institute of Rural Reconstruction of China

Wen Tiejun 温铁军 | Southwest University, Institute of Rural Reconstruction of China

Formerly Dean of Agriculture and Rural Development at Renmin University, Wen is known for developing the term ‘three ags’ (sannong 三农), broadening the government’s previous focus on agricultural production to encompass rural society and governance. Long sympathetic to Mao-era ‘people’s communes’, he was a supporter of then Chongqing Party Secretary Bo Xilai’s 薄熙来 late 2000s redistributive measures. He is said to favour greater state control of the private economy. His detractors associate him with ultra-stability rather than rural revival through bringing capital to the countryside.

Wen researched rural policy for the State Council’s Development Research Centre and the Party’s Rural Policy Research Office in the 1980s and 90s. Dismissed by then Premier Zhu Rongji 朱镕基, he edited an official rural policy journal before his appointment at Renmin University.

Xiang Songzuo 向松祚 | Deputy Director, Centre for International Monetary Research, Renmin University of China

Xiang Songzuo 向松祚 | Deputy Director, Centre for International Monetary Research, Renmin University of China

Following sharp downward pressure on the economy in December 2018, Xiang noted that despite a National Bureau of Statistics estimate of 6.5 percent GDP growth, ‘a major internal report gave it as 1.67 percent, and another as negative’. Going viral, this was blocked the next day. An earlier 2018 article 'Our fundamental problem is not China-U.S. relations' indirectly criticised the unbearable weight of foreign policy under Xi Jinping: ‘Chinese media and some scholars unreservedly say that the US is in decline and China is already at the centre of the world stage—this is bound to invite trouble and make enemies for China’. He adds ‘Consumption waves are coming to an end; that of autos and real estate are falling sharply, so we are now facing huge problems'. Xiang complained of the financial industry turning from the real to the virtual economy, and rising local debt.

Graduating in economics from China University of Science and Technology and Renmin University, Hubei-born Xiang took postgrad studies at Cambridge and Columbia Universities. He is reputedly close to Hu Jintao 胡锦涛.

Xu Xiaoqing 徐小庆 | Dunhe Asset Management Co Macro Strategy director

Xu Xiaoqing 徐小庆 | Dunhe Asset Management Co Macro Strategy director

Rapid RMB depreciation in 2022 was due mainly to a surging US dollar as the US Fed kept hiking interest rates; weakening forex fundamentals is an aside. The RMB’s value against a basket of forex indices has dropped only one percent, staying above 100. Foreign exchange reserves have held up. Current fluctuations will prove short-term, with the exchange rate buoyed by growing demand for RMB settlement of dollar-denominated foreign exchanges, resulting from a strong goods trade surplus and shrinking services trade deficit in 2022. Despite waning overseas demand, PRC manufacturers are climbing up the global value chain, leading to a widening trade surplus with major consuming countries, e.g. the US, and a declining trade deficit with advanced manufacturing states, including Germany, Japan and South Korea.

Joining Dunhe in 2013 as a hedge fund asset manager, Xu focuses on global allocation of major financial assets. Holding bachelor's and master's degrees in economics and international finance from Tsinghua University, he served as head of CICC’s (China International Capital Corporation Limited) fixed-income department for over ten years.

policy ticker highlights

gems from our feed of policy releases and domestic debate


power more capricious than capital

Aisixiang | 18 October

context: Pursuing ‘healthy’ markets‘, Beijing launched measures against monopoly and other violations, above all via supervision of the ‘platform economy’, cemented in a law effective 1 August 2022. Yet headwinds building up due to COVID-19, Ukraine, property crisis and ‘common prosperity’ (now inscribed in the Party Constitution), have frightened capital. Transferring the target from private to state entrepreneurs, the recent Party Congress signalled tweaking, but not back-pedalling, of the supervisory threat. Author Chen Jian speaks for the CCDI.

trade policy

exporters see fewer new orders with trade fairs delayed

21st Century Business Herald, Caixin | 9 October

context: Different kinds of in-person trade fairs have been a major channel for traders to reach new clients and secure orders. With the zero-COVID policy shifting these fairs online or preventing such gatherings, many SMEs have struggled to effectively pitch new products and maintain their foreign client base.


delayed data finally released, GDP grows by 3.9 percent 

Caixin, Jiemian | 24 October

context: After being delayed for almost a week while the 20th Party Congress was being held, the data show a decent recovery after the slowness of the first half of the year, but weakness in demand remains. COVID-19 controls remain and will set a ceiling for economic recovery.


20th Party Congress ag and rural narratives

Weixin (1), Weixin (2), China Economic Daily | 22 October

context: Wrapping up its Congress on 22 October, the Communist Party of China set the tone of its understanding of opportunities and the most crucial challenges facing ag and the rural sector. Security and modernisation are key themes.

energy and environment

Xi reaffirms carbon neutrality at 20th Party Congress

China Energy Net Blog | 18 October

context: Xi’s words reaffirm current policy commitments set out in recent 5-year plans with no major pivots. China’s decarbonisation policy for the next few years is now, mostly, set in stone: the focus will move to implementation.

science and innovation

Shanghai looking to be an industrial hub of the future

Shanghai Municipal Government | 11 October

context: As Shanghai works on getting its economy back on track after being hard hit by COVID-19 lockdowns earlier this year, the government is looking into plans to build the city’s competitiveness as a global economic and innovation hub, using longer-term strategies than the policy packages and economic support which focus on short-term recovery.


hospitals ill-prepared for further reform says expert

Weixin | 7 October

context: The PRC has been wrestling with an imbalanced healthcare system: it is overly reliant on hospitals in affluent metropolises to provide even basic medical services while primary care facilities have been grossly underused. Beijing is determined to shore up the capacity of grassroots medical institutions, directing patients away from top-tier hospitals, only to find years of effort fruitless. Progress is hindered as hospitals across the country are crippled by financial woes amid tightened COVID-19 controls and declining revenues from drug sales. A sustainable profit-making mechanism, above all, is urgently needed.

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