Key takeaways from the 20th Party Congress
The Party Work Report of the 20th Party Congress stressed that high-quality growth is the basis of economic growth policy. Congress has pointed to several factors that can lead to the goal of quality growth. (Here is the full text of the report in Chinese)
The key takeaways we’ve outlined below are in the order of importance we get from the tone, language, and sequence that emerged in President Xi’s Party Work Report.
The report explicitly pointed out at the 20th Party Congress that the advancement of technology is vital for economic development and the need for professional manpower for such development.
He said that China “insists that science and technology is the first productive force, talent is the first resource, and innovation is the first driving force, implements the country’s development strategy through science and education, the strategy for strengthening the country through talent and the strategy for development through innovation”.
While this does not mean the immediate removal of restrictive policies on tech companies, it does at least address the urgent need for talent and promote self-sufficiency in technological advancement. We believe this echoes the US CHIPS law. Thus, research spending on semiconductor technology is expected to increase. Typically, policies are released after such significant events in China.
When the report mentioned Covid, there was no change in the tone of the Covid measures. Life is seen as the first priority and there was no wording like ‘balancing economic costs and benefits’ when it came to Covid measures.
We expect the existing Covid measures, i.e. number of Covid tests, quarantine days, etc., to remain the same after the Party Congress. This will continue to put budgetary pressure on local governments, and when the number of Covid cases increases, we should continue to see localized lockdowns in China. We include this scenario in our forecast for 2023.
The parental control policy must remain in place
The Party’s work report said that the ecology of the Internet continues to improve. We believe this refers to the political outcome of restricting the hours children spend on online games. The policy is unique to mainland China as it is tied to the ideology of Chinese-style socialism.
It is in a way a reminder that Party ideology can infuse itself into policies that affect the growth models of industries.
There is quite a bit of content in the report that refers to more aggressive goals related to environmental, social and governance of the economy. What was mentioned most and repeated over and over again was building a high quality education system, not only to support the technological advancement we mentioned earlier, but also for the economy as a whole. together.
The content of promoting the green economy has not changed, but the report has highlighted its importance for future growth.