China enters Xi era with a double-edged sword

November 2, 2017 – Xi Jinping is the first incumbent Chinese president to resume the “core” position in the Communist Party and write his name into Constitution after Mao. Global asset manager Natixis argues that a Communist Party equipped with authoritarian power is a double-edged sword for the Chinese economy.

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On the positive side, it says, if power is exercised appropriately, it should be easier to crack down on constraints to reform. On the negative side, it will be much harder to redirect the economy if it sets in the wrong direction because checks and balances will be absent.

Regarding the details of the revision of the Xi’s thoughts into the Party Constitution, Natixis says, several key economic messages are clearly sent out.

The Party rules everything. This means the Party will not only control State-owned enterprises (SOEs) but, most probably, will also extend their influence to the private sector.

The transformation of China’s Principle Contradiction. To fortify support, Xi will need to deliver and offer more welfare to Chinese citizens.

The enshrinement of the Belt and Road Initiative (BRI). The BRI will be the cornerstone for China’s soft (and maybe hard) power.
“In sum, Xi’s power should help China as long as he gets it right and will harm China if he gets it wrong,” says Natixis. “There will be little room to shift gears in a more personalized approach to power.

“The Party (i.e., Xi) will rule everything and Chinese citizens will get a prize for it (more welfare). The West should start realizing that it is no longer as important for China as before, and the Belt and Road will take the baton over time.
www.natixisresearch.com (ATI).

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