China has come to a standstill as half the population travels over a one-week public holiday. But that quietude is expected to last several more weeks.
Although the Chinese will head back to work and school on Monday, their country is expected to remain in a holding pattern ahead of a pivotal Communist Party Congress set to start later this month.
“Commentators and markets rightly assume that the authorities are consumed by this transition and that all other policy matters are on the back-burner or in lock-down until after the Congress,” Freya Beamish, Pantheon Macroeconomics’ chief Asia economist, wrote in a recent note.
The once-in-five-years meeting will usher in leadership changes that are likely to see incumbent President Xi Jinping extend his term and consolidate power. The coming years of Xi rule will be critical for the world’s second-largest economy as it grapples with the fallout from three decades of unbridled growth.
As Xi — the most powerful Chinese leader in decades — embarks on a new era, the meeting will review “faulty” outcomes from the economic reforms and review if China needs a new direction, said independent economist, Andy Xie.
China undertook a series of market reforms in the last three decades that propelled the Communist country to the spot of the world’s second largest economy.
Market watchers, however, are concerned about the nation’s debt-fueled growth, industrial overcapacity and capital outflows that may potentially spur a global economic crisis.
The Communist Party has been working to steer outbound merger and acquisition activities over the last year, but major initiatives have slowed ahead of the Congress. That push is likely to pick up again in the fourth quarter, said Chunshek Chan, Dealogic’s global M&A research head.
No matter the macroeconomic concerns, the only thing on Beijing’s mind at this time is consolidating power in the country, Xie said: “It’s much more important now to strengthen the control of the Communist Party than anything else.”
“The key is to have the Communist Party as a coherent organization to control everything in the society — that seems to be the case. The people at the top worry about the stability. Stability is always number one in China,” added Xie.
