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A Look At China's Leadership Transition

ByDanske Markets
Published 11/16/2012, 10:28 AM
Updated 05/14/2017, 06:45 AM

Xi Jinping as expected will be the next leader of the Communist Party of China (CPC). The powerful Politburo Standing Committee (PSC) will continue to be dominated by conservatives and notably, the most vocal supporters of political reforms were not promoted. On the surface it looks like a conservative victory.

The main disagreement is about the need for political reforms. Hence, the economic reforms in China will continue and if anything they will be sped up as focus shifts towards longer-term structural economic reforms to soften the decline in China's long-term growth.

We do not expect major macroeconomic stimuli in the wake of the leadership transition, albeit there might be a slightly positive impact on investment demand from the removal of the political uncertainty.

Major political reforms are unlikely. There appears to be substantial disagreement about the need for political reforms within the CPC and that could be a source of increasing political instability. In our view the next five years will turn out to be a transitional phase until the next CPC Congress, when younger and more liberal minded members of the CPC might have another shot at entering the PSC.

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