China is going to slow next year. We know it from the data already. But we’re also getting it from the politics, via PIMCO:
After the radical anti-corruption purge of the last five years, the upcoming Party Congress is unlikely to be the typical midterm power reshuffle, as seen in 2007. The consensus is that President Xi will centralize power, but the questions are to what degree, and whether there will be more radical institutional change to the party leadership, such as the Standing Committee of the Politburo. If President Xi’s power is strongly reinforced, the 19th Party Congress could be a defining moment for the next decade – essentially, the start of a new political cycle.
We see three developments to watch closely.
- Will President Xi be elevated to a paramount leadership positon and will his ideology – “Xin Jinping thinking” – be crystalized and endorsed as the dominant party ideology?
- Will there be institutional changes, such as the composition of the Politburo and the conventions surrounding retirement, which could open the door for leadership terms longer than the usual two five-year terms?
- With the changes to the Politburo and the Standing Committee, who will lead the macroeconomic team? The vice premiers, the cabinet members and the People’s Bank of China (PBOC) governor are all likely to be replaced after the Party Congress.
