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If you’re a foreign investor and haven’t read the official report of the Chinese Communist Party Congress, don’t bother. Here is why:
First, Wall Street is right to point out that there is not much new. You are not missing any drastic changes.
Second, see if you really understand this word salad: socialist market economy, unified national market, cultural-ethical advancement, development security, theoretical innovation, major-country diplomacy, common prosperity… This is not just lost in translation, my friend. Even in Chinese language, the catch phrases are difficult to comprehend. The word salads are increasing in China today.
These political jargons are arcane and ambiguous, purposely so. As a result, they are subject to a variety of understandings and misunderstandings. Thus the market volatility.
Third, even if you understand the policy, it is still uncertain if, when, and how China will implement it. A good example is the Chinese Internet crackdown last year. China passed the Anti-Monopoly in 2007 but did not apply it to the Internet sector until 2021, with no apparent warning.
Fourth, understanding the policy is one thing, trading the market is another. Even if you know everything from policy creation to execution, it’s not easy to predict how the market will respond.
Part of my frustration is also that I am not a political expert and this is not a political publication. That’s OK. Most investors and traders are not political experts either. Ultimately it’s about how the market interprets the changes.
To this end, let’s review what Chinese brokers (sell-side analysts) say about the Party Congress. I read over 60 Chinese research reports this week to produce this summary for you. Here are the high-level takeaways. I will write seperately about sectors and stocks. Stay tuned.
No brokgerage firm in China will publish anything negative about the Party Congress. A strong positive bias is taken for granted.
Like their foreign counterparts, Chinese analysts recognize “security” as the most important word from the Party Congress report.
Several analysts believe the economy takes priority over security. The Party report clearly stated that China should, “first and foremost”, pursue high quality development (of the economy).
The words “development”, “growth” and “economy” together also appeared most frequently in the Party report. These three words mean essentially the same thing: economic growth. China is trying to return to pragmatism, at least on paper.
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