The 20th Chinese Communist Party (CCP) Congress that gets under way on Sunday will be closely watched for clues about the future direction of the world’s second-biggest economy.
The once-in-five-years gathering, at which Xi Jinping is set to secure an unprecedented third term in power that will set up him as potential president for life, comes as China’s economy is on a precarious footing.
After decades of rapid growth, China’s $18 trillion economy is facing some of the worst headwinds in decades, including draconian COVID-19 restrictions, Western sanctions, capital outflow and a deflating property bubble.
Here are three areas with implications for the Chinese economy to watch for at the key meeting.
Leadership changes
While there is little doubt that Xi will remain leader – either by staying on as general secretary of the seven-member Politburo Standing Committee (PSC), the CCP’s top decision-making body, or creating a new post such as party chairman – the congress will announce a host of leadership positions that have responsibility for economic policy.
Among the biggest questions is who will replace Chinese Premier Li Keqiang, the second-highest ranking official on the PSC, who has emerged as the most prominent voice on economic matters during the pandemic.
Li, who hails from a rival faction associated with former president Hu Jintao, announced in March that this year would be his last as premier, although he possibly could stay on as a member of PSC.
After being sidelined throughout Xi’s tenure, Li, a fluent English speaker who is well known among the foreign business community, gained prominence this year with dire warnings about the economy and the need for local officials to better balance pandemic curbs and growth.
While Li has not directly criticised Beijing’s ultra-strict “zero-COVID strategy”, his emphasis on the economy has fuelled speculation of a split within the party on how to manage the pandemic after nearly three years of punishing lockdowns, mass testing and border controls.
Chinese Premier Li Keqiang announced his intention to retire earlier this year [File: Jason Lee/Reuters]
Names mentioned as Li’s possible successor include Chen Miner, the top CCP official in Chongqing and a close confidant of Xi; Wang Yang, a former Guangdong province boss known for his relatively liberal and market-oriented outlook; and Hu Chunhua, a protégé of former President Hu who serves as a vice premier responsible for poverty alleviation, agriculture and trade.
Another key figure to watch is Vice Premier Liu He, Xi’s principal economic adviser, who is widely expected to retire from his position on the 25-member Politburo, the CCP’s second-most powerful body.
The Harvard-educated Liu, who is believed to have known Xi since childhood, has stressed the need for a sustainable growth model that prioritises mitigating economic risks, poverty reduction and environmental conservation.
Taylor Loeb, an economics and trade analyst at Trivium China, said Liu’s replacement potentially stands to be China’s most powerful economic official.
“The two most likely selectees are current National Development and Reform Commission chair He Lifeng and current China Banking and Insurance Regulatory Commission chair Guo Shuqing,” Loeb told Al Jazeera.
“If He takes Liu’s role, we’re likely looking at a more Xi-directed, state-centric economic policy. If it’s Guo, the bias will be toward increased capital account liberalisation and deleveraging.”
State control versus private enterprise
Under Xi, China’s economy has been brought under tighter state control.
After decades of market-oriented reforms initiated by his predecessors, Xi has repeatedly prioritised political control, national security, inequality and other concerns above economic growth.
“The key question for me is if the Chinese economy continues to be subordinated to what tends to come under the label ‘national security’ – meaning security of the status of Xi Jinping and the elites and the elite system that surrounds him – or if economic development and the wellbeing of Chinese citizens becomes the overarching objective,” Carsten Holz, an expert on the Chinese economy and professor at the Hong Kong University of Science and Technology, told Al Jazeera.
“I suspect we will continue to see ‘national security’ to be the dominant theme. The Chinese economy then only matters to the extent that it endangers or supports ‘national security.’”
During a 12-month period that overlapped with heightened regulatory scrutiny of giants such as Alibaba and Tencent, the tech sector’s 10 biggest players lost about $2 trillion in market value.
While Xi has framed the drive as an effort to tackle rising inequality, the crackdowns are widely seen as also aiming to head off any future challenges to the CCP’s monopoly on power.
China’s economy is expected to grow just 2.8 percent in 2022, according to the World Bank, which would be among its worst performances in decades.
“To date, ‘common prosperity’ has been a relatively nebulous concept: does it mean heavy-handed redistribution? Does it mean a more level playing field to improve equality of opportunity?” said Loeb.
“I expect we’ll get more intel on how exactly the party is thinking about ‘common prosperity’ at the congress, which will set the stage for how the policy is implemented in practice.”
Alicia García-Herrero, chief Asia Pacific economist at Natixis in Hong Kong, said she expected the congress to solidify the shift toward a state-driven economic model.
“We are starting to hear about a new concept, namely ‘people-oriented economy’ rather than market economy,” García-Herrero told Al Jazeera.
“This is clearly a very socialist concept with Chinese characteristics, which will acquire importance after the party congress. It is basically a justification of a state-driven economic model but putting people in front of the concept and opposing the market.
“Shared prosperity is the companion concept of a people-oriented economic model,” García-Herrero added.
“President Xi has already clarified that China has no intention to follow Europe with its welfare-state model but is looking for something different. In fact, shared prosperity is about the state playing an even more crucial role and avoiding excessive wealth concentrated in a few hands.”
Self-reliance versus globalisation
Despite presiding over a massive expansion in trade that helped double the size of China’s economy, Xi has stressed the need to boost economic self-reliance.
In speeches, the Chinese leader has called for greater self-sufficiency in sectors ranging from science and technology to energy, food and finance.
Xi’s calls for self-sufficiency have been driven, at least in part, by concern that China’s economy is vulnerable to attack by Western countries, especially the United States, which has rolled out a raft of sanctions to hobble Chinese tech firms, including semiconductor manufacturers.
For Xi, the risks of integration into the global economy have been further underscored by the Western-led sanctions imposed against Russia over its invasion of Ukraine.
China’s ultra-strict ‘zero-COVID’ policy has placed the economy under strain [File: Aly Song/Reuters]
At the same time, many foreign businesses view China as increasingly unwelcoming due to its harsh pandemic restrictions and rising hostility towards private enterprise and outside influence.
As China and the West increasingly view each other less as trading partners than a threat, economic decoupling is widely expected to continue, if not accelerate.
“A third term for Xi would cement the idea in Washington and other Western capitals that China’s political and economic divergence from the West will continue – making deeper economic engagement increasingly difficult, including in green technology supply chains where China has an edge,” Logan Wright and Agatha Kratz said in a recent commentary for Rhodium Group. “Nominations of technocrats seen as somewhat distant from Xi’s personal networks could revive hopes for an embrace of limited reform, but promise fatigue is real.”
Loeb said Beijing could use the congress to flag increased domestic investment in industries considered critical to China’s supply chain, especially in the tech sector.
“Beijing will double down on its drive for technological self-sufficiency and security vis-a-vis key resources, but we’ll be watching to see if policymakers discuss what role foreign enterprises will play – or not play – in those ambitions,” Loeb said.
García-Herrero said she expected the CCP gathering to double down on the message of self-reliance.
“In fact, China might not fully open – restrictions especially for outbound may remain – but this will be justified on the grounds of national security and this will also be a case of self-reliance,” she said.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
