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China’s 20th Party Congress and Critical Implications For US-Sino Economic Relations



Last week saw the culmination of the 20th National Congress of the Chinese Communist Party (CCP), commonly referred to as Èrshí Dà (Chinese: 二十大). One of the immediate outcomes saw The Nasdaq Golden Dragon China Index, which are US listed Chinese stocks plunge to their lowest level in almost 10 years wiping more than $73 billion in combined market cap. The selloff was indicative of investors' frustration over the persistent zero-Covid policy, as well as their concern over China's private sector reforms and economic policies under the rule of Xi and his party loyalist allies. However, amongst the doom and gloom in many media outlets over rising US-China tensions, the US and China have a robust trading relationship which is not going to disappear nor decouple overnight. The ability for companies like TargetTGT +1.1% and WalmartWMT +0.2% to sell cheaper goods to US consumers has been a cornerstone of US-China economic cooperation. Moreover, US auto exporters like Tesla delivered 83,135 China-made electric vehicles (EVs) in September this year, an 8% increase from August breaking its monthly record, according to the China Passenger Car Association (CPCA). China’s auto exports increased over 50% in the first nine months of 2022, shipping out over 2 million vehicles. It is estimated that more electric cars will be sold in China this year than the rest of the world combined. This has occurred despite an energy crisis, war in Ukraine and shocks to global supply chains. It is widely believed zero covid policies continue to significantly hamper economic growth in China however the reality is that zero covid measures will not last forever.To get more news about china 20th party congress, you can visit shine news official website.

Many people both in and outside of China were hoping that after Xi Jinping secured his third term that he would start to relax Zero Covid regulations and allow the economy to start to recover. However, in all speeches and announcements since the 20th Party Congress there has been no mention of relaxing Zero-Covid measures. Instead, the successes of Zero-Covid were extolled during the congress and afterwards, leading many to believe that Zero-Covid is here to stay regardless of its impacts upon the economy.

Rising labor costs, the Uyghur Forced Labor Prevention Act and other legislation, trade wars, and the persistence of the Zero-Covid policy have led businesses to pursue alternative countries to do business in. These contrasting positions have led businesses to pursue a China plus one strategy. Where they keep significant operations in China to maintain access to the Chinese market but have started to look for alternatives in other Southeast Asian countries such as Vietnam and Singapore. However, China is still one of the largest markets for U.S. businesses to have access to.

The end result is that businesses are slowing new investment in China as they are attempting to hedge their supply chains to avoid Covid lockdowns, U.S. sanctions, and other potential risk factors. Craig Broderick, former Chief Risk Officer of Goldman Sachs and BMO Board Member notes, “The paths of the US and China are clearly diverging. Both parties recognize that an economic, technical and cultural bifurcation will entail costs to each, but presently believe them to be worth incurring. The reality is, however, that a full accounting will only be made in the fullness of time - and there are a lot of imponderables!”

In The US-China Business Council’s 2022 Member Survey which was conducted in June 2022, it found “Ninety-six percent of respondents have experienced negative impacts on their China business because of the control measures, with nearly half reporting severe negative impacts.” The control measures have also impacted more than half of companies’ future business and investment plans.

Zero covid policies have also contributed to a talent drain as well. Foreign expats measured by share of nonimmigrant visas issued by the US to Chinese citizens dropped from 16% in 2018 to 4% in 2021. This reduced the exchange of ideas and innovation as well as student exchange. That being said, there will continue to be a huge demand for Chinese students obtaining STEM (Science, Technology, Engineering or Mathematics) degrees in the United States both now and in the foreseeable future. In many sectors, businesses in developed economies still have comparative advantages in terms of technology versus their Chinese counterparts.