China: Expect slower but more sustainable growth ahead – Nomura

The 19th National Congress of the Communist Party of China (NPCPC) convened this week in Beijing and will conclude on 24 October and President Xi Jinping’s remarks at the opening session summarized the achievements of the past five years and, more importantly, set out the blueprint for the Party and the country for the future, explains the research team at Nomura. 

Key Quotes

“Our main takeaways from President’s Xi’s remarks: 

• The introduction of “thoughts of socialism with Chinese Characteristics in a new era” emphasised the perseverance of the Party’s leadership which is clarified as the most basic nature of socialism with Chinese Characteristics.   
• The major social contradiction has changed from being between the growing material and cultural demand by the people and outdated productivity, to being between growing demand for a good life by the people and unbalanced and insufficient development.
• Xi outlined two-stages in achieving the second “centenary goal” − building a prosperous, strong, democratic, culturally advanced, harmonious and beautiful modern socialist country by the middle of the 21 century: 1) in the 15-year timeframe of 202035, develop China from a moderately prosperous society into a socialist country with “modernisation basically achieved”; 2) in another 15-year timeframe from 2035 to the middle of the 21 century, develop China into a “great modern socialist country”.  Moreover, the adjective “beautiful” was added to the list of characteristics describing a “modern socialist country”, to be achieved through green development, environmental protection and “harmonious environmental development”.
• A shift from high-speed growth to high-quality growth: supply-side reforms will be deepened and implemented further; reforms of state-owned assets and state-owned enterprises will be strengthened.”

“The messages conveyed in his opening remarks were consistent with President Xi’s previous views.” 

“We believe the president has further consolidated his power in the Party and will use his second term in office to engage in dealing with the structural imbalances facing China in order to achieve the first centenary goal of building a “moderately prosperous society” in all respects by 2021.”

“We continue to expect growth to slow in the coming years, as the focus shifts from the pace of growth to the quality of growth, underpinned by continued structural reforms.”