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10/19/2017 The 7 Key Takeaways From Xi Jinping's Vision For "A New Era" In China

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The 7 Key Takeaways From Xi Jinping's Vision

For "A New Era" In China
By Tyler Durden
Created 10/18/2017 - 11:33

by Tyler Durden [1]
Oct 18, 2017 11:33 AM
[2] [3]

As reported first thing this morning [4], China's President Xi Jinping outlined his vision for the next
five years, ushering in a "new era" (a term he repeated 36 times) of development in China, as the
Communist Partys 19th Congress opened in Beijing on Wednesday. During a 3-hour long speech,
Xi said the internal and external situations facing China were undergoing complicated changes
which the party needed to address. Xi started with the opening remark that the prospects are
bright while the challenges are also grave, before reminding his audience of his achievements
over the past five years, which included: poverty reduction, strengthening the one party rule,
national security, cutting down pollution and the Belt and Road infrastructure initiatives. One can
also throw in "nationalizing China's capital markets" in this list. 1/6
10/19/2017 The 7 Key Takeaways From Xi Jinping's Vision For "A New Era" In China

Further, as DB's Jim Reid wrote overnight, Xi's anti-graft drive has achieved an important and
irreversible momentum and he insisted that China has zero tolerance on corruption. On the long
term, he wants to set the agenda for the country to be a modern, socialist power by 2050. On the
economy, he says the liberalisation of both interest rate exchanges will continue as "the
door China opened will not close but will open wider and wider".

Elsewhere, Xi wants China to make the "quality and efficiency" of growth a priority and deepen
supply side reforms as well as insisting on the need to reduce excessive capacity and debt ratios.
On housing, he said "houses are for people to live in, not for speculation" and he promised to
provide more homes through a variety of different channels.

Before his formal address, Deputy central bank chief Pan also noted that he expects that the Yuan
will have a more secure foundation after the congress allowing the central bank to push
exchange rate market reforms. 2/6
10/19/2017 The 7 Key Takeaways From Xi Jinping's Vision For "A New Era" In China

Xi also vowed to step up ideological guidance within the party, strengthen its anti-corruption
campaign, retain the governments grip on Hong Kong and Macau, and oppose any moves towards
independence in Taiwan.

Courtesy of SCMP, here are the seven major takaways from Xi's report:

1. A new name for Xis political philosophy

Xi said China has formed socialism with Chinese characteristics for a new era. The idea will
be the guiding principle for the countrys development in the coming years. The slogan was
released amid speculation about how Xis political thought would be enshrined into the partys
constitution. There are 14 elements behind the concept, with one key idea being that the party
should lead in every aspect of life in China.

Xi said the dream of national rejuvenation would only be a fantasy without the leadership of
Chinas Communist Party. The party should lead in all areas and the authority of the party central
leadership should be respected, he said. Cadres should keep in line with the party leadership, while
the party should tighten its lead on ideological work. The party resolutely opposes all attempts that
will weaken, distort or reject the leadership of the party and the implementation of socialism, he
said adding that a principal contradiction had emerged in Chinese society because of uneven
development and the publics demand for a better life.

2. Becoming a nation with leading, global influence by 2050

Xi laid out some ambitious targets for the next 30 years and more. The first batch should be
achieved from 2020 to 2035, Xi said. China will be a top ranked innovative nation by 2035 with a
large middle-income population and narrower wealth gap. Chinas soft power should be boosted, Xi
said. From 2035 to 2050, China should become a nation with pioneering global influence.

3. Keeping up with the irreversible momentum of anti-corruption campaign and

maintaining the rule by law

China will set up a leading group for comprehensive rule by law. Xi repeatedly talked about the
concept during his speech and vowed the party and the government would rule the country under 3/6
10/19/2017 The 7 Key Takeaways From Xi Jinping's Vision For "A New Era" In China

the law and through public oversight. No one would be able to put themselves above the law, he
said. He added that China must watch out for any attempt to copy Western-style democracy.

Xi also issued a warning to delegates at the Great Hall of the People on corruption, saying China
insists on zero tolerance of graft. He said the government has been unswerving in fighting tigers,
destroying flies and hunting down foxes, referring to the governments sweeping anti-corruption
campaign. He said a national supervision law would be formulated and shuanggui a party
disciplinary practice would be replaced.

4. Protecting national sovereignty

Chinas capability to deal with national security should be boosted as the nation will resolutely
protect its sovereignty and interests. Xi said China has made a historical breakthrough in national
defence and military reform. The navy has protected the nations maritime interest and its army
rapidly upgraded its weaponry. For the coming years, China will continue pushing for integration
between the civilian and the military sector. The Peoples Liberation Army should be a world class
force by 2050. China also opposes separatism under the guise of religion or extremist thought, Xi

5. Upholding central government authority over Hong Kong and Macau and opposing Taiwan

Xi said the one country, two systems principle will not be changed nor distorted in Hong Kong. The
central governments jurisdiction over the two Special Administrative Regions, which also includes
Macau, should not be shaken, he said. On Taiwan, Xi said Beijing has properly handled the
changing situation facing the island and will continue to resolutely oppose any move to seek
independence for Taiwan.

6. Creating a level playing field for foreign businesses

Countering foreign diplomats and business concerns that the government was blocking overseas
investment, Xi said China would give equal treatment to all businesses. The China which has
opened up will not close, but will open wider and wider, he said. Chinas GDP has increased from
54 trillion yuan (US$8.2 trillion) five years ago to 80 trillion yuan and the government would aim for
growth that is of higher quality and sustainable, he said.

7. Protecting the public interest

Fighting poverty was crucial for China to become a moderately prosperous society, Xi said. All
provinces which are under the poverty line should climb above that threshold by 2020. He also
pledged to create more jobs for college graduates and migrant workers. Addressing concerns over
rising property prices, Xi said houses were for people to live in, not for speculation.


Not enough? Then here are 6 more key highlights, this time from Goldman's China economist, Yo
Song, who writes that "overall the report sent few new signals on either near-term cyclical policy or
longer term structural policy, in our view, although there are a few changes/ highlights/ new
concepts to note, which we outline below."

Change in the principal contradiction facing Chinese society, which is usually viewed
as the guidance on the Party's key area of focus. In the report, Xi said that the principal
contradiction facing Chinese society has evolved to be that between unbalanced and
inadequate development, and the people's ever-growing needs for a better life, a change
from previously, the principal contradiction in our society is still between the ever-growing 4/6
10/19/2017 The 7 Key Takeaways From Xi Jinping's Vision For "A New Era" In China

material and cultural needs of the people, and the backwardness of social production. (This
statement had been in place since 1981.) We view this change in principal contradiction as
an acknowledgement of the need for more efficient and balanced economic development.
Instead of purely focusing on the speed of economic growth, policy makers now also
emphasize higher productivity, higher profitability, more innovation and efficient distribution, as
well balanced development between urban and rural areas, and among different regions of the
country. This is also consistent with the tone from policy makers in recent years (e.g., the new
norm from Xi, and focusing on not just the quantity but also the quality of development in the
Central Economic Working Conference).
Xis thoughts on socialism with Chinese characteristics for a new era. The report came
up with thoughts on socialism with Chinese characteristics for a new era, which should be
effectively a summary of Xis thoughts and will likely be incorporated into the Party
Constitution during the Congress. There are 14 fundamental principles, which have been
mentioned previously in different situations, with the first being ensuring Party leadership over
all work. On economic areas, Xi mentioned continuing to comprehensively deepen reform
and adopting a new vision for development, which reiterated Xis five development concepts
(i.e., innovation, coordination, green development, opening and sharing), and reemphasized
letting the market play a decisive role in resource allocation. Environmental issues are listed
as a separate principle under ensuring harmony between human and nature, and the report
mentioned plans to implement the most rigorous ecological and environmental protection
A new two-stage development plan. In the report, Xi emphasized importance of the period
up to 2020 as "the decisive stage in building a moderately prosperous society," and said that
"all requirements on building a moderately prosperous society from the 16th, 17th, 18th Party
Congress must be followed." Presumably, this would include the goal of doubling income by
2020 established in the 18th Party Congress, though it was not explicitly mentioned here.
Then Xi proposed a two-stage development plan from 2020 to the middle of the 21st century,
with the first stage from 20202035 to see that socialist modernization is basically realized,
and the second stage from 2035 to the middle of the 21st century to develop China into a
great modern socialist country. However, there are no quantitative details in the plan currently.
Characterizing the economy as turning from a high-growth phase to a high-quality
development stage. The report also mentioned building a modern economic system. Major
measures for this include deepening supply side reforms (e.g., reiterating key structural
tasks such as over-capacity cuts and de-leveraging), strengthening innovation, promoting
SOE reforms with mixed ownership, developing a twin policy management framework with
both monetary policy and macro-prudential tools, significantly loosening market access to
domestic service sectors and protecting foreign enterprises legal rights in China.
Other highlights included a proposal to establish a central leading working group on
the comprehensive rule of law, although the exact form of the group has not yet been
specified. In social areas, Xi highlighted a policy intention to widen the coverage of education,
reduce income gaps between low- and high-income groups, strengthen social protection (e.g.,
retirement, unemployment), reduce poverty and deepen ongoing medical service reforms. He
also reiterated that, houses are for living, not for speculation and mentioned plans to speed
up the development of a housing system with supply from multi entities, protection from multi
channels and combination of rental and sale.
The next publication will be the list of Central Committee members on Oct 24, followed
by revealing of appointments to the Politburo Standing Committee on Oct 25.

The above was summarized best by UBS' chief economist, Paul Donovan, in just one sentence:
"China's economic challenge is that the successful model of the last twenty years will not work in
the next twenty years."

And while we previously gave a full preview of what to expect from the 19th Congress [5], here is a 2
minute summary for those pressed for time: 5/6
10/19/2017 The 7 Key Takeaways From Xi Jinping's Vision For "A New Era" In China

So what's China's Communist Party Congress all about?

Anti-corruption army Asia Capital Markets Central Committee China China

Chinese communists Communist Party Communist Party of China Congress Corruption
Crown Prince Party Foreign relations of China Hong Kong Jim Reid Liberation Army
Macau Monetary Policy national security navy One Belt One Road Initiative One
country, two systems Politburo Standing Committee Politics Socialism with Chinese
characteristics Taiwan Unemployment Xi Jinping Xi Jinping visit to the United States

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