The 20th National Congress of the Chinese Communist Party (CCP) convened in Beijing yesterday morning, President Xi Jinping delivered a work report at the opening that summarised the CCP and government’s achievements over the past five years and set out a blueprint for the next five years and beyond.

At KraneShares, we are watching the Congress closely as it progresses. Here are the 3 key areas on our watchlist - Performance, Policy, and People (new leadership team) and our takeaways after going through Xi’s 2-hour speech of over 14,000 words report covering 15 sessions:

1. Performance review of CCP/the Government:

This is the CCP’s self-review of their performance over the last 5-years as a Party and leader of the country. In this session:

• Xi acknowledged China’s economic achievements by stating the growth of China’s GDP to 114 trillion Yuan in 2021, weighted over 18% to the world’s GDP and contributed over 38% of world growth
• Xi also proudly announced that China has achieved a well-off society for over 100 million people which is a key target for the CCP to achieve. This is to help low-income households to meet and beat the previous average income to bring them out of poverty
• Xi also emphasized the kick-off initiatives including but not limited to materially improving China’s economic influence on the international stage, building innovative technology, and advancing key technologies in crucial areas

The most pleasing message we got from Xi’s report is his acknowledgment of the challenges faced and further challenges ahead. Indicating as the country leader he’s fully aware of the economic slowdown, and relationships with the rest of the world and is prepared to align policy if needed to achieve the targets for the next 5 years.

2. Policy guidelines including domestic, international affairs, and economic

11 sessions out of the 15 directly provided guidance on policies that touched on all aspects including domestic, international, economic, and household. Here are the highlights:

• High-quality growth – Xi highlighted that economic development remains important with a continued focus on high-quality growth, and focus on the real economy when boosting the modernization of industrial supply chains. 
• People are the focus - Xi reiterated to further improve income, people’s livelihood, and employment. Suggested accelerating the establishment of a housing system.
• Dual circulation growth - focus on domestic growth together with an international investment opportunity.
• Global initiatives commitment - Carbon/Green are all mentioned in the report. Xi emphasized proactively and gradually achieving carbon neutral goals, advancing the energy revolution, a fast forward in building a new energy ecosystem, and proactive involvement and contribution to global initiatives in dealing with climate change.
• A modern China - Xi highlighted improving the framework, policy, and risk monitoring system to safeguard supply chains of food, energy, and other key products (Tech).
• Two key millstones for CCP to deliver: 1) 2020-2035 - to basically achieve socialist modernization 2) 2035-2050 build China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful.
• National security - Xi emphasized the need to firmly implement the national basic policy of "One Country, Two Systems". Regarding Taiwan – Xi pledged to make the most efforts to pursue a peaceful reunification but said China will not promise to renounce force. This policy is not new and should not surprise the market or investors, it is re-emphasis only. Xi has repeatedly said, the people on both sides have always wanted peace and he’s committed to making the effort to pursue it that way.

Among these 11 sessions, one key message Xi said is: “the next 5 years is the crucial period for China to achieve all the goals set here and achieve a modernized society for China.” How we at KraneShares interpret this is the next 5 years are all about executing, implementing, and delivering the goal. Historically, that is a period in which monetary, fiscal, and regulatory policies should stay accommodative for corporates to focus on action. In our opinion, it is positive for the market.

3. People – the new leadership team will be unveiled on 23^rd Oct when new members of the Politburo and Politburo Standing Committee will be officially revealed at the first plenary session of the 20th CCP Central Committee.

Overall, this is a balanced, comprehensive, and reassuring report by the CCP and the government. It provides clear guidance on long-term policy initiatives and reassured a transitioning phase for the economy to execute and implement to achieve these goals. It sets a clear direction for the Central Economic Work group that will host the conference in the middle of December in setting the economic policy outlook.

A fun fact on textual analysis

Compared to the 19th report, the high-frequency mentions in Xi’s report yesterday were "people", "socialism", "modernization" and "security" whereas "reform” has remarkably declined. We assume the regulation-tightening cycle is behind us.

What is the next

According to the disclosed agenda that Party leaders and delegates will focus on the amendment to the Party’s constitution, a review of the report of the 19th CCP Central Committee, and the election of the 20th CCP Central Committee and the 20th CCP Central Commission for Discipline Inspection. On 23^rd Oct, we should be able to see the new lineup of China’s new leadership revealed.