Multinationals Expect Gains With China's New Leadership
Xi Jinping, a Communist Party school president who helped plan the Beijing Olympics and chart Hong Kong policy, will take over as president and party chairman from Hu. Wang Qishan, a former central bank vice governor and one-time Beijing mayor credited with pushing SARS out of Beijing in 2003, will be put in charge of economic policies.
Analysts with their ear to the dirty but always buzzing (new construction? more cars?) ground in Beijing expect these changes, and others, to the leadership of the world's second largest economy after the party holds its 18th National Congress from Nov. 8. The new team would officially take over as early as March.
Chinese leaders usually avoid announcing personal policy agendas, preferring at least in public the cloak of unity across different factions and generations. So it takes a few years to gauge what makes a new leader really new.
But there's consensus that the post-Nov. 8 team will do something fast about the country's increasingly ominous slowdown in economic growth , probably a series of moves to foster both consumption and manufacturing. Growth in either would be a welcome fix for multinationals with existing business in China (i.e., almost anyone you can name) but questions about where it's headed.
China is still growing enviably fast, but the Asian Development Bank said this month it had lowered its 2012 GDP growth guess from 8.5% to 7.7% and next year's from 8.7% to 8.1%. The low-interest lender said risks to the economy were "likely to intensify in the short run" because of soft global demand and the shaky health of China's trade partners.
Infighting over who's going to take which leadership job also has slowed down the one-party government's work, including formulation of economic policies. A highly public element of that in-fighting is the all-but-complete ouster of the outspoken, populist corruption-buster Bo Xilai. Once the infighting is out, stock markets from New York to Hong Kong should gain for a few weeks purely on sentiment that things won't get worse.
"Political power transition will remain an overhang until the final list of Politburo is announced or confirmed," says Joseph Tang, investment director at Invesco in Hong Kong. "The political infighting will remain a hurdle for the central government to come up with quick and effective policy initiatives in tackling the current economic problems."
Those policy initiatives will push ahead with the 2011-2015 five-year plan for elevating domestic consumption as a driver of GDP growth. Healthy consumption would reduce China's dependence on exports to countries with waning demand.