SNAPSHOT2 min read

China's 20th National Party Congress: six things we learned

Investor sentiment towards China has been volatile following the 20th National Party Congress. But was it really all bad news?



Josh Barber
Investment Manager

Chinese stock markets have performed poorly since early 2021, as we explained in 'Where next for Chinese equities?'. Many investors hoped that the 20th National Party Congress (NPC) in mid-October would be a turning point. However, the market response to the high-profile meeting was not enthusiastic.

The NPC is held every five years and is a forum for the appointment of new leaders, debating strategy and agreeing changes to the constitution. It has also been used to set out plans for the near future and this is what investors were hoping for this time round. They were therefore disappointed by the lack of response to the pressing challenges facing the Chinese economy – including Covid, the property market and regulation. However, the event provided some meaningful signals about Beijing’s longer-term objectives.

Timeline: Regulations, COVID, Housing and Geopolitics

MSCI China All Shares (USD) with key recent events


Six things we learned

Longer-term focus

Chinese President Xi Jinping kicked off the NCP with a two hour speech. The key thing to note is that it was a “political report,” focused on ideology and longer-term government targets. However, many had expected a “work report” outlining solutions to China’s near-term challenges. The distinction is an important one. While political reports can provide a signal on policy direction, they are less focused on current challenges and tend not to include detail of specific policies. Issues like Covid and property markets are more likely to be fully addressed in December’s Central Economic Work Committee conference, which could have an important bearing on the outlook for Chinese markets in 2023.

Promotion of like-minded allies

Xi Jinping used the NPC to strengthen his position by putting allies into key jobs. Four members of the Politburo Standing Committee (PSC), a group of seven top-ranking party officials, were replaced. Three of the replacements worked with Xi in previous postings before he became president. Over the longer-term, the lack of checks and balances is a concern and raises the risks associated with “groupthink.” However, this setup should lead to greater cohesion at the highest level of government. This may allow for more effective response to China’s current, significant challenges.

The rise of Li Qiang

As part of the reshuffle, the former party secretary and mayor of Shanghai Li Qiang was promoted to the PSC. He is considered by many to be the most likely successor to Xi Jinping. Li is widely seen as “pro growth.” As mayor of Shanghai, he supported growth and innovation by establishing the Shanghai STAR market (a technology-focused equity market modelled on NASDAQ), expanding Greater Shanghai and helping Tesla open its gigafactory at the height of US-China trade war in 2018.

The party’s key goals

National security, technology and energy transition were key themes featured in Xi’s opening speech to the NPC. The emphasis is a response to the heightened tensions over Taiwan, with the US recently restricting the sale of high-tech computer chips to China. Xi also reiterated a target for GDP per capita to equal that of a “medium-level developed country” by 2035. This is thought to require a growth rate of 3.7% to 4.5% annually for the next 12 years.


Though we have seen some easing of Covid restrictions over the past month, the NPC itself offered little change in policy. However, following the NPC, we learnt that a key architect of China’s “Zero Covid” policy, Vice Premier Sun Chunlan, was not re-elected to the 24-member Politburo. Her departure may accelerate the easing of restrictive policies. However, cases have surged recently with Covid reported in all but 1 of the 31 provinces in China. This means that the bulk of current restrictions may remain in place until next spring.

Reaction and outlook

The market reaction to the conclusion of the NPC is telling. The CSI 300 (an onshore, blue-chip index) saw a fairly muted response. The Hang Seng China Enterprises Index (an index of Chinese stocks listed in Hong Kong, more easily accessible by international investors) fell by more than 7% at the close of the first trading session following the NPC. This suggests that overseas investors were far less impressed by the NPC than domestic ones.

There are three events that could have an important bearing on the outlook.

First, the G20 summit. President Joe Biden and Xi Jinping have met in person - for the first time ever. While tensions over Taiwan and technology are far from resolved, a widely-shared photo of the two presidents shaking hands may signal a desire to improve the working relationship. Any de-escalation of geopolical tensions could boost sentiment towards Chinese markets.

Next is the Central Economic Work Conference in December. The government will use this meeting to outline economic targets and policies for 2023 and may be a more significant event for investors than the NPC.

Early next year, the World Health Organisation will discuss Covid-19 and may formally lower the threat level. This would allow Beijing to step back from its zero Covid policy without losing face. This could be very significant for investors, given that Covid-restrictions continue to weigh on the Chinese economy and Chinese market returns.

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.



Josh Barber
Investment Manager


Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at IFC1, Esplanade, St Helier, Jersey, JE2 3BX, (No.31076).

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.