Given that the country’s economic challenges are likely to persist for some time, however, any uptick following this year’s NCCPC is likely to be milder than in the past.
We expect few, if any, signals for changes to long-term structural policy. Pronouncements in this area are likely to be in line with the major elements of Xi’s thoughts in the 14th Five-Year Plan. Released in early 2021, it includes long-term objectives through 2035.
Investors, however, should also keep an eye on the plenums that follow the NCCPC, as these could provide clues about long-term policy changes. The third plenum typically discusses important high-level policy and reform topics while the fifth plenum addresses the Five-Year Plan.
Will the NCCPC End the Zero-COVID Policy?
The NCCPC, in our view, is unlikely to result in an end to the zero-COVID policy, although there may be further moderation of the rigor with which it is applied. In fact, we see no end to the policy until more older adults have been vaccinated. So far, about 67% of those older than 60 have received their third shots, but only 38% of those over 80.
But the daily vaccination rate has been low recently, at around 30,000. According to Goldman Sachs estimates, providing 80% of the population over 60 with a booster shot by year-end would require a daily vaccination rate of about 300,000—a great challenge in such a short period.
Clearly, the immunization of a significant share of the older population is a prerequisite to any policy easing. But the prospects for a short-term resolution seem even more unlikely, given the political considerations that policymakers have attached to it.
At a recent politburo meeting, President Xi said the issue should be viewed as long-term and systematic and, from a political perspective, in terms of the relationship between pandemic control and economic development. There is, then, no certainty as to when or how the zero-COVID policy will end.
For short-term cyclical policy clues, the politburo and State Council are better places to look.
China’s Short-Term Policy Channels
The major forums to set cyclical policy direction are the politburo meetings in April, July and December. After the December meeting, the Central Economic Work Conference, hosted by President Xi and consisting of senior national and local officials, elaborates policy for the year ahead.
Its messaging is reflected in the premier’s working report—which can include specific numerical economic targets, such as GDP growth targets and the budget deficit—to the NPC in March.
Weekly State Council meetings hosted by the premier are also important for cyclical policy and may provide the occasion for significant policy announcements.
Investors, in other words, should be looking at more than the NCCPC for policy clues.
NCCPC Is One Piece of the Puzzle
Indeed, the secret to understanding China’s evolving policy environment, in our view, lies in continuously monitoring its various facets, paying close attention to key government documents and speeches and articles by the country’s senior leaders.
The official journal Qiushi has recently republished speeches given by President Xi during the last two years. Those who have been paying less attention may mistake these republished articles for announcements of new policies, while these policies have, in fact, been in place for some time.
For astute China-watchers, however, they serve as a reminder of the NCCPC’s role as a forum to affirm the importance of Xi’s thinking.
