China:  National Congress of the Communist Party not likely to have a big impact on markets - Danske Bank

The National Congress of the Communist Party in China will start 18 October and will last one week. According to analysts from Danske Bank, the Congress as such is not likely to have a big impact on markets but they consider that it could be positive for risk sentiment if at the Congress we get a clearer signal on the need for reforms. 

Key Quotes: 

“A key focus will be whether President Xi Jinping strengthens his power even more by putting mainly his ‘own’ people into the Standing Committee of the Politburo – the top leadership of China.”

“Another key focus will be what happens on the other side of the Congress on economic reforms. Will implementation get a new push? Or will it continue to lag, with the risk of China running into severe problems down the road?”

“We are cautiously optimistic that Xi Jinping will find a middle road and not strengthen his power so much that it creates a backlash at a later stage. We also see a good chance that reform implementation moves up the agenda next year following his first term in which Xi has focused on politics and his power base.”

“Nevertheless, continued focus on deleveraging and the cooling of the housing market is set to lead to a slowdown in China over the next year. However, what happens after that depends a lot on how China moves on reform and financial risks.”

“Over the next year we expect China to be a moderate drag on global growth, be a disinflationary force and give less support to commodity markets. In the long term, though, the Congress will be more important for financial markets, as whether China over the next five years is able to deal with financial challenges and carry through supply side reform will be crucial, not just for China but for the global economy.”