“The cementing of Xi’s role as leader for the next decade should be positive for the Chinese economy”

According to Xinhua News Agency, the Central Committee of the Communist Party of China (CPC) has proposed a number of amendments to the Chinese constitution, pending ratification at the upcoming National People’s Congress. One important amendment proposed is removal of the term limits for the president and the vice president of China, which paves the road for Xi Jinping to stay as the head of the state after completing his second term in 2022.

This move, while seems radical, is not really a surprise to us. It is consistent with Xi’s greatly enhanced political power after the CPC’s 19th National Congress in October 2017. In Chinese politics, general secretary of the CPC is a far more important position than that of president of the nation, which is a symbolic role. As we pointed out in a previous note, the likelihood for Xi to remain as general secretary rose substantially post the 19th Party Congress. The latest proposal to remove the presidential term limits in the constitution simply adds to the likelihood that Xi will stay in power beyond 2022.

In our view, the cementing of Xi’s role as leader for the next decade should be positive for the Chinese economy at the current stage of development when China goes through some fundamental changes in the economy and, at the same time, faces some serious challenges. With uncertainties related to power transition for the next decade largely reduced, one should expect strong policy continuity going forward.

On the geopolitical front, extension of Xi’s rule implies that the Belt and Road initiative will likely continue to be supported as it is Xi’s signature foreign policy initiative. This should benefit many smaller economies (especially in central and Southeast Asia) that are involved in the programme through better infrastructure and stronger trade. However, competition for regional dominance in the Asia-Pacific region between the US and China could further intensify in the coming decades. Geopolitical tensions over a few hot spots will likely rise, including frictions in the South China Sea, Taiwan, Senkaku Islands (known as the Diaoyu Islands by Chinese) and possibly on the Indian-Chinese border.

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