19th Party Congress: Implications for China’s Future – Part II

china communist pic

The 19th Party Congress of the Chinese Communist Party (CCP),  is coming up on 18 October, where they will discuss political, economic, and foreign policy developments for the coming years. It’s an assembly of thousands of delegates from China’s ruling elite, including state leaders, top business executives, and military generals

Here are some key tips during this transition period for for foreign companies doing business in China:

1. Keep a close eye on the various policy lines to help position your company for success in relation to the party, the government, business partners and competitors. While leaders appointed are important, it’s the Party Congress Report that sets the policy direction for the next five years. For example, during the last Party Congress, “ecological civilization” (party speak for environmental protection) was given equal priority with economic development in the report. It’s no coincidence that environmental protection has been a priority for the past five years. This has hit foreign companies’ pockets directly, with heavy fines for violating various environmental protection policies.

2. Watch for the emphasis on quality of economic growth and target expectations. Will they continue to pursue overly high growth or shift towards slower, but more sustainable growth? The former would benefit companies aligned with infrastructure spending and property development, while the latter would imply more policy support for the services sector, including healthcare, education and professional services.

3. Keep an eye on how strongly the 2017 Cybersecurity Law of China will be implemented. China does not want to scare away businesses by enforcing overly arcane rules, so perhaps regulators will back off when they realize how disruptive overly aggressive cybersecurity rules are. However, the party leadership often enacts regressive policies, despite these downsides, especially when it comes to issues of perceived national security. If policies around cybersecurity, state security and core technologies are highlighted in the report, it would be a strong signal that foreign companies need to brace themselves for significant policy tightening.

In summary, while the new names on the Politburo Standing Committee matter, and will be interesting to observe, the developments that will truly affect foreign businesses in China will come from the words spoken at the party congress. Watch that space and plan your business strategy in China accordingly.


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