Meet the New (Same as the Old) Boss

In October, China’s Communist Party will unveil changes in its leadership—except at the very top. Xi Jinping is expected to receive a third five-year term as General Secretary of the Party, state President, and Chair of the Central Military Commission. That fact alone—Xi’s continuity in power—will dominate coverage of the event, and be the focus of international reaction.

Other critical questions include:
• Does the makeup of the new leadership below Xi point to greater pushback against his policies or a consolidation of his authority?
• Will political priorities continue to dominate policymaking, or will newly appointed technocrats be able to shift the system to focus more on economic performance?
• Will these technocrats be able to change China’s highly restrictive approach to COVID-19 containment?
• Will changes in China’s foreign policy approach and relations with the West emerge once the Congress comes to an end?
For investors and corporates, the media narratives surrounding the 20th Party Congress will be just as important as the leadership changes themselves, as conservatism and continuity of leadership and policy under Xi will be seen as negative signals for markets and for China’s medium-term economic trajectory.

Posted September 29, 2022
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Tracking Credit Events at LGFVs

The downturn in China’s property market has significantly slowed the economy over the past year. One major casualty is local government financing vehicles (LGFVs), as declining land sales revenues reduce local governments’ capacity to support these firms. Additional credit events at LGFVs will emerge in the months ahead. Corporate acceptances are the first products facing defaults, while LGFVs are still trying to avoid defaults on publicly traded bonds.

Posted September 26, 2022
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Property Market Chartbook, September 2022

Property sector indicators continued weakening in August, and 30-city sales so far in September have declined by 42% y/y. A widely anticipated broader policy support package for the sector has not materialized, but the smaller decline in completions suggests Beijing has gained some traction in finishing stalled housing construction. Sharp declines in land sales (-57%) and new starts (-47%) virtually guarantee that the slowdown in construction activity will extend into the first half of 2023.

Posted September 21, 2022
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