Panorama China - Targets By 2020
The Third Plenary Session of the 18th Communist Party of China Central Committee (CPCCC) was held between November 9 and 12 in Beijing. “Reform” was confirmed as the key theme of the 4-day meeting and the agenda has key implications to various businesses. While key reform ideas and directions were highlighted and agreed by the country leaders in principle, details of the respective execution plans were not detailed. It was not surprising to us since the plenary session only lasted for 4 days and it would not be feasible to talk about every detail due to the significant breadth of the topics. On the contrary, given the complexity of different issues, it will take time before all the arrangements are introduced, and it will require consistent effort by the country leaders to negotiate with a wide-range of stakeholders before the key operational plans will be announced.
We hope to use this paper to cover what we see as the key implications from the 4-day meeting. The focus of this paper is put on messages from the 4-day session that would lead to direct impacts on various industries and the vast business community.
Some key messages:
- Headline economic growth to slow and no massive monetary or fiscal stimulus in sight, while economic environment will remain accommodative
- As the government will actively and agressively tackle overcapacity issues, smaller and inefficient players in industries with overcapacity issues will be hurt
- The move toward a more open-economy signals higher intention for the China to participate in trade talks, but thespaghetti bowlsituation could hurt smaller companies
- Higher volatility in renminbi (RMB) expected while RMB will appreciate 4% in real terms against the USD for 2014, and companies could hedge against currency fluctuation by invoicing and settling the bills in RMB
- Higher environmental standands and less subsidies on resources could hurt energy intensive industries