The Next Generation: What to Expect from China’s New Leadership

The Next Generation: What to Expect from China’s New Leadership

Jing Ning Portfolio Manager, BlackRock’s Fundamental Equities Team, Asia

Days after the climax of a long U.S. presidential campaign, China’s Communist Party began its once-adecade political leadership reshuffle that may profoundly change what drives the country’s growth and who benefits the most from it. The process lasts months, but Xi Jinping and Li Keqiang are poised to lead the world’s second-largest economy and most populous nation for the next 10 years. Their entrance is at a critical time for China. Still very much a key engine of the global economy, China has seen its GDP growth slow for the past seven quarters and this year may post its slowest economic expansion since 1999.1 Some of this slowdown has been welcome to avoid overheating and inflationary excesses. And when a new premier takes office in March, corporate China may already be in the midst of an upturn in its earnings cycle. Nevertheless, Beijing has big challenges ahead. This paper highlights four of them and discusses the directions that some of the policies of China’s next generation of leaders will take to meet them. } China’s economy is too reliant on inefficient investment for growth: Policies will veer away from massive building projects aimed at pumping up growth and financed with local government debt. Instead infrastructure construction will be increasingly targeted at supporting new industries as well as the millions of rural workers in coming years expected to migrate to cities in search of employment. } country’s massive and growing urban population The will need infrastructure and services to support it: Not only will better access to social services foster stability, it will also contribute to increased household consumption and balanced growth. } Shifting demographics will gradually make labour scarcer and increase the need for better healthcare: Li Keqiang is China’s premier-in-waiting until he officially...