“China’s 20th Party Congress will be held from Oct 16 to Oct 23. This Party Congress will focus on a leadership reshuffle, ideology, and long-term strategy. Hence, it is unlikely that we will see any announcement of concrete economic policy. We expect President Xi Jinping will present a lengthy work report detailing the Party’s achievements over the past five years along with updates on the fight against COVID, the common prosperity policy campaign, which is aimed at promoting income equality and more balanced and fair regional development, the property market and other important topics.
We believe China’s zero-COVID policy is likely to remain in place until at least next March when the National People’s Congress will be held. However, the restrictive program probably could extend even longer, gradually being phased out, subject to vaccination progress and the evolving COVID situation. Despite the recent pickup in easing in the property market and in private investment and consumer spending, we have not seen visible signs of a turnaround in the economy as a result of the restrictive zero-COVID policy. We need to see stronger policy change to shore up the confidence of both private business and consumers.
In the meantime, we believe there should be some marginal improvement with an uptick in policy implementation as new leaders start with their new track records. Therefore, the risk for Chinese government bonds is for yields to go up rather than go down. However, without a meaningful acceleration in the economic recovery, the yield selloff likely will be limited. On the renminbi (RMB) front, we can see the depreciation of the currency is still driven largely by the strong US dollar (USD) but also by weaker growth fundamentals given the potential for the domestic economy to reopen next year if the zero-COVID policy relaxes.”
20th CCP Party Congress in Beijing: No concrete economic policy to be expected
Source: Brandywine / Franklin Templeton
Fundscene Livestream and NFT Metaverse Talk
