China’s Communist Party is set to repeal presidential term limits in a move that would allow Xi, 64, to rule beyond 2023. Xi, who has been steadily building his influence since coming to power in 2012, had his name enshrined in the party’s charter in October, a rare honour that eluded his two predecessors.
The removal of presidential term limits should guarantee one thing for investors: Their China portfolios will be increasingly tied to one man.
Analysts say the political certainty should be largely positive for Chinese assets as it bolsters the president’s ability to drive through reforms. The absence of checks and balances, though, raises the risk of policy errors.
Xi’s term since 2013 has been marked by a mostly steady economy but also periods of volatility in the financial markets, triggering government intervention. The possibility of Xi ruling for a longer term is seen as leaving a positive impact on Chinese markets; it’d would also ensure more supply-side reforms and deleveraging efforts, as well as stable fiscal and monetary policies.
Challenges loom, too, including taming the towering debt pile, the threat of slower economic growth and dealing with the ageing population.
Government-led stimulus has been a key driver of China’s growth since late 2008. Along with that, the country has also built up a mountain of debt at nearly 300% of gross domestic product (GDP) compared with around 140% before the global financial crisis.
The trillion-dollar Belt and Road plan, the centrepiece of a soft-power push by Xi – who may be the strongest Chinese leader since Chairman Mao in 1976 – also raises fears. More than $250bn in China’s overseas investments failed between 2005 and 2015, according to the American Enterprise Institute and the Heritage Foundation.
China’s slowing growth has raised concerns that years of risky lending might lead to a disaster worse than the US sub-prime collapse.
There are now signs of fundamental changes at the highest levels under Xi. After decades of focus on hitting growth targets delivered breakneck expansions accompanied by fouled air and water, a shift towards more balanced development for the economy is conspicuous now than ever. The focus is on greater environmental protection as well as quality over quantity.
Xi’s anti-corruption drive has snared more than 1mn officials (including a star party leader who had been seen as a possible future chief), according to a Bloomberg estimate.
Everyone – from investors to central bankers and executives – has plenty of compelling reasons to strain to understand China’s policies. How China’s $10tn-plus economy fares, undoubtedly, is a global concern.
Xi must have learned the practical lesson that a more equitable economic prosperity is the surest path to sustainable growth and may give the market a decisive role in shaping the economy of China, the world’s biggest oil, and second biggest liquefied natural gas, buyer.
Here’s the sign of things to come: Xi Jinping is here to stay as China’s undisputed ruler.