Celebrating the end of his first term in office, President Xi Jinping addressed the opening of the week-long 19th National Congress of the Communist Party of China (CPC). The week-long event, which is held every five years, began in Beijing last Wednesday.
Xi unveiled his latest contribution to party thought: “Socialism with Chinese characteristics for the new era.” The president outlined the party’s priorities for the next five years, as well as his vision for the country and its relationship with the world. His speech focused on a long list of reforms that have significant implications for global markets and governance.
Impending changes affecting global markets
In recent years, there has been voracious demand for imported products, but Xi said new policies would be implemented to reduce the volume.
Xi promised to increase market access for foreign companies and give market forces a greater role in determining prices, especially in the financial system.
He also indicated that steps would be taken to curb the country’s dependence on debt and improve the environment. In response to the 2008 global financial crisis, the Chinese government increased credit flows and kept interest rates low. To keep GDP growth at over 6.5%, large amounts of debt have been necessary over the past decade. The debt to GDP ratio at the end of 2016 is estimated to be roughly 260%, up from 160% in 2008.
Xi mapped out a long-term future for China’s rise on the global stage, predicting that by 2050 the country will ‘stand proudly among the nations of the world’
Since the property sector is financed largely by debt issuance, new curbs on lending will discourage construction, reducing global steel demand as well as prices in the years to come. The president also coined a catchphrase that may well become a mantra: “Houses are for living, not for speculating.”
The Chinese government’s aim to eventually ban the production and sale of gasoline-powered vehicles – to be supplanted by electric vehicles – will push energy prices down over the long term. He pledged to build a “beautiful China” with a cleaner environment.
These developments have the potential to affect the global prices of products, equities, metals and energy.
Xi’s ‘China Dream’
Xi laid out his “China Dream” of renewed national wealth and power, saying that it would become a “moderately prosperous country” by 2020 and “a modern socialist prosperous society” by 2049. He repeatedly declared that China is ready to move closer to center stage and become a “mighty force” able to lead the world on political, economic, military and environmental issues.
Xi mapped out a long-term future for China’s rise, predicting that by 2050 the country will “stand proudly among the nations of the world” and “become a leading global power.” He denounced isolationism and reiterated the point he made at the Davos summit that China will be a champion of economic openness via the Belt and Road Initiative. “No country can retreat to their own island, we live in a shared world and face a shared destiny.”
As a responsible global power committed to tackling shared dangers such as climate change, China had “taken a driving seat in international cooperation to respond to climate change.” He added, “Only by observing the laws of nature can mankind avoid costly blunders in its exploitation. Any harm we inflict on nature will eventually return to haunt us.” After last year’s election of US President Donald Trump, a protectionist and climate change denier, some have looked to China for leadership on issues such as free trade and global warming. What China has been doing in these areas will have ramifications far beyond its borders.
He also noted that China did not seek global hegemony but “no one should expect China to swallow anything that undermines its interests.” China has no interest in the western system of democracy, he said. “No one political system should be regarded as the only choice, and we should not just mechanically copy the political systems of other countries … The political system of socialism with Chinese characteristics is a great creation.”
In summary, Xi’s speech covered a range of themes, from housing to soil erosion; from Hong Kong independence to the South China Sea; rural poverty to the great national rejuvenation; cyber-security to global governance; and Marxism to military modernization. He expressed confidence that China will become the world’s leading country in terms of “national power and international influence” through carefully implemented reforms. However, he also warned that achieving what he has hailed the “China Dream” would be “no walk in the park,” and “It will take more than drum-beating and gong-clanging to get there.”