April 5, 2018
Politics in the People’s Republic of China is at a point of transition: the country’s bicameral legislature convened last month for its annual session to rubber-stamp a series of new laws and constitutional amendments, which are expected to have important ramifications for political and economic governance in the world’s second largest economy.
One change in the constitution that has attracted much debate is the lifting of term limits on the presidency. Xi Jinping, whose second five-year term began in March, has now been given the option to serve a third, from 2023 to 2028. Should investors welcome or fear the prospect of a third term for Xi? What are the implications for China’s economy and private markets? We explore these topics and more in our report.
While China’s political institutions have been designed to reduce this uncertainty, visibility into the third term for Xi means lower volatility for even longer, at least until 2028. Volatility thereafter could rise or fall, dependent upon how Xi handles the eventual succession process.
Many of their reforms may be unpopular with free-market liberals abroad, and politically difficult to implement at home. However, economists broadly see these reforms as vital to help sustain China’s remarkable run of economic expansion while reducing systemic risks.