Analysis: Xi’s next premier faces tough task reviving Chinese economy

BEIJING, Oct 24 (Reuters) – China’s next president, who will take office in March, will have few options but to step up stimulus to revive an economy battered by COVID-19, policy analysts and Analysts said on Monday, as the revelations of Xi Jinping’s new ruling party have hit the market.

On Sunday, Xi was approved for a third term as president and introduced a Politburo Loyalty Committee made up of loyalists including Li Qiang, the head of the Shanghai Communist Party who is who will now succeed Li Keqiang as president.

Li Qiang will have the task of driving growth to prevent widespread job losses that could undermine public stability, at a time when Xi is focusing more on security.

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He will inherit an economy, the world’s second-largest, that has been dragged down by strong anti-COVID measures and a growing economic crisis, while hopes for any meaningful change have dwindled as communists take over. managing the economy.

On Monday, Hong Kong stocks fell, Chinese stocks fell and the yuan weakened after a new move by China’s top government fueled fears that Xi would double down on inflation-causing inflation forecasts.

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“The COVID-19 restrictions will not be fully loosened anytime soon, the property sector will not deliver soon, the exchange rate has been completely wiped out, undermining the confidence of investors, ” said the source on condition of anonymity.

“The members of the new economy will have a few options and start sizeable incentives next year to support the economy, focusing on investing in large projects,” the source added.

China’s economic kingpin, Liu He, a US-trained economist seen as the mastermind behind the early reforms, will be replaced by He Lifeng, another Xi acolyte. The central bank’s reformist leader, Yi Gang, may lose his job when he reaches mandatory retirement age in 2023, Reuters reported.

Li Qiang’s performance surprised many policy analysts who pointed to Shanghai’s poor handling of the COVID-19 crisis that led to its two-month lockdown of 25 million people, and his lack of experience in national economic operations.

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“What we need to do urgently is to revive the economy,” Jia Kang, former head of the China Academy of New Supply-Side Economics, told Reuters.

“We are facing the problem of declining expectations and confidence and it is meaningless if we cannot revive the economy,” Jia said.

THE PROBLEM OF WATER

Xi’s push for a state-funded, market-driven economy could undermine his long-term goal of turning China into a global superpower by mid-century, policy analysts and analysts said.

China’s economic miracle began in 1978 when Deng Xiaoping began a historic revolution, allowing more companies to develop and open the economy to foreign investment.

“With national security rising to the top amid rising geopolitical risks, how to strike a balance between development and security may be one of the most important questions for leaders in ‘years to come,’ Citi analysts wrote after Xi unveiled his new team. .

After government data on Monday showed a faster-than-expected recovery in the third quarter, investors will look for key forecast indicators from the Politburo meeting at the annual Central Economic Work Conference, the second of which expected in December.

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In September, China’s unemployment rate in urban areas rose to 5.5%, the highest since June, as COVID-19 curbs damaged businesses, and the unemployment rate for jobseekers in the middle 16 and 24 and 17.9%.

China continues to miss its annual growth target of around 5.5% – a new Reuters poll forecasts 2022 growth at 3.2%. Polls show that China’s growth could reach 5.0% in 2023, with a small contribution from the country.

Xi’s selection of a standing committee upset investors who had hoped he would keep some reform-minded leaders, including former Guangdong Party chief Wang Yang.

Alvin Tan, head of Asia FX Strategy at RBC Capital Markets in Singapore, said, “There is likely to be more respect for Xi Jinping’s ideas on how to move the country and the economy forward.”

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Reporting by Kevin Yao Editing by Tony Munroe and Andrew Heavens

Our principles: Thomson Reuters Trust Principles.

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