China's economic troubles may shadow boost to Xi Jinping's dominance

On the eve of a landmark Communist Party congress that’s set to confirm Xi Jinping’s third term in power, China’s economy is confronted with one of its most challenging periods in decades as household and business confidence plummets.

Latest data paint a picture of a weak economy, largely a consequence of Xi’s zero-tolerance approach to combating Covid infections and a crackdown on property sector debt. 

Consumer-price figures for September raised the possibility of deflation in the economy as demand slumps. High-frequency indicators and a spike in Covid cases suggest economic weakness continued into October. Trade data — expected to be published Friday — will likely show exports, which have supported the economy through the pandemic, are slowing as European economies and the US stand on the brink of recession. 

“Xi needs to respond to the rockiest economy Beijing has faced in decades,” said Jacob Gunter, a senior economy analyst at the Mercator Institute for China Studies in Germany.

Confidence data is particularly concerning, with household expectations for the job market dropping to a record low in the third quarter, and a reluctance to spend meaning bank savings jumped 56 per cent so far this year compared to 2021. Business surveys show their confidence is unusually low, making them reluctant to hire and invest.

Cynosure, but why? (REUTERS)

The 20th party congress of the Chinese Communist Party (CCP) starts on Sunday. The conclave of roughly 2,300 party leaders, held every five years, takes place at the Great Hall of the People on Beijing’s Tiananmen Square, with much of the proceedings behind closed doors and lasting about a week.

Here is how it is likely to proceed:

Xi’s titles

A third term as general secretary for Chinese President Xi Jinping breaks with the two-term limit of recent precedent. Xi’s other titles are chairman of the central military commission, which is widely expected to be renewed during the congress, and president, which is up for renewal at the annual parliamentary meeting in March.

The opening

The ritual begins with dozens of leaders walking into the main hall to thunderous applause and the stirring Welcome March song before taking their seats on-stage against a backdrop of giant red flags and a hammer and sickle plaque. During the opening ceremony, which is broadcast with a delay, Xi will read out the 20th party congress report, reviewing the party's achievements of recent years and laying out its vision for the next five years. At the 19th party congress, the opening speech lasted 3 hours and 24 minutes.

The rest of the week

Party leaders retreat behind closed doors in smaller groups to discuss the report, personnel, and the draft of an amendment to the party charter.

The closing event

At the closing ceremony, delegates vote to endorse the congress report and party constitution amendment. They also elect a new Central Committee — roughly 200 full members with voting rights and about 170 alternates — from a pre-selected shortlist.

The first plenum

A day after the congress, the newly elected Central Committee convenes behind closed doors at its first plenum. There will be votes on lists of candidates for the next Politburo, which usually has 25 people, and its Standing Committee, which currently numbers seven. Later, the general secretary leads the new Standing Committee into a room at the Great Hall of the People where journalists are gathered.