In October 2017, international investors were focused on indications of China's Communist party leaders’ commitment to further reforms in the country's 19th National Congress of the Communist Party of China (CPC), which commenced on October 18, 2017 in Beijing.
Back then, Mark Konyn, group chief investment officer at AIA, told AsianInvestor that a lot of international investors were looking at the 19th national congress “to see if there will be a confirmation that a reform agenda is still a priority.”
In the previous years leading up to the 19th congress in 2017, there had been a reduction in new initiatives as authorities reined in excesses resulting from policies enacted following the global financial crisis, so “international investors will be keen to gauge the likelihood of further reforms as part of the forthcoming five-year plan,” Konyn said in October 2017.
Such initiatives would include policies related to banking, SOEs, and taxation, he added.
Revisiting his comments and reflecting on the development in the last five years, Konyn told AsianInvestor that the main elements remain relevant, although perhaps the emphasis and point of focus have adjusted, given economic developments since then.
“Initiatives to address structural modernisation continue at pace, with a greater emphasis on the quality of growth and the need for social inclusion. These principles guide policy and therefore will greatly influence how capital is deployed,” Konyn said.
He pointed out that the need to align allocation with policy has always been a key determinant of success, and that this notion has been greatly emphasised in the past 5 years.
“Slower and higher quality growth will mean better risk pricing in an environment where rising tides will not lift all boats. As ever, those international allocators who see themselves as constructive in bringing both capital and practices to China continue to be presented with opportunities,” Konyn added.
In terms of the ongoing 20th party congress, Konyn emphasised that details will only be forthcoming after the party congress, which sets the tone but provides little detail.
“The run-up to the people’s congress and that congress itself, is likely to provide greater insight. The commitment to continuity is the main message for investors,” Konyn said.
Aidan Yao, senior emerging Asia economist of AXA IM, believes that President Xi has hit all the right notes of what the market was looking for from the Political Report delivered on October 16.
“Despite limited immediate implications, the Report is still an important document for long-term investors to decipher. To that end, it should come as a relief to many that the party leaders still consider 'economic development' as their top priority in building a modern and prosperous China,” Yao wrote in a comment on October 18.
In so doing, the Party vowed “unwavering support” to the private economy, continuing to pursue quality opening up and liberalisation, and letting the market play a “decisive role” in resource allocation.
“The fact that these phrases continued to feature prominently in Xi’s speech suggests desire for policy continuity. Aligned with the 'development first' doctrine was the emphasis on education, technology, and human resources as fundamental drivers of China’s advancement,” Yao wrote.