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Xi Is Expected to Face Major Economic Challenges When He Enters an Unprecedented Third Term

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  • President Xi Jinping will need to confront China's major economic challenges after he secures a widely expected unprecedented third term in office, according to veteran investor David Roche.
  • He said Xi will very likely "sail through" his confirmation for another five years term, without any "real resistance to him at senior levels of the communist party" in the upcoming National Congress Community party meeting.
  • "He faces a lot of challenges. Not only the external challenges of Taiwan, which is certainly not getting any closer to China, but he faces the economic challenges," said Roche, president and global strategist at Independent Strategy.

President Xi Jinping will need to confront China's several major economic challenges after he secures a widely expected unprecedented third term in office, according to veteran investor David Roche.

Roche said Xi will very likely "sail through" his confirmation as China's top party chief in the upcoming National Congress meeting, which sets the stage for him to secure another five-year term as the country's leader.

There won't be any "real resistance to him at senior levels of the communist party,," he added at the Congress party meeting due to be held later this year.

"He faces a lot of challenges. Not only the external challenges of Taiwan, which is certainly not getting any closer to China, but he faces the economic challenges," Roche, president and global strategist at Independent Strategy, told CNBC's "Squawk Box Asia" on Thursday.

China's economy is slowing down with growth likely to settle around 3% to 4%, he said, adding it's "partly conditioned by the legacy problems of debt and bad assets and partly conditioned by demography and very poor productivity."

China's growth weakens

China economy grew a weak 0.4% in the second quarter compared to a year ago, which brought growth for the first half of the year to 2.5% — making it difficult to reach the official full-year target of around 5.5%, according to analysts.

On Tuesday, the International Monetary Fund slashed its growth forecast for China. The fund expects the world's second-largest economy to grow 3.3% in 2022 — its lowest clip in four decades, barring the initial fallout from the Covid-19 crisis in 2020.

Goldman Sachs has also cut its forecast for the MSCI China index due to a worsening slump in China's property market. The investment bank slashed its earnings outlook for the index to zero growth for the year, down from 4% previously.

Roche said China's economy is struggling with "enormous real estate problem and banking problems."

"You've seen it in people trying to get their deposit back. You see it in people refusing to pay their mortgages, which is hitting at the very concept of common prosperity, which is [Xi's] main ticket," he added.

Xi initiated the concept of "common prosperity" last year, which is generally understood as moderate wealth for all, rather than just a few. But it remains a vague, frequently used slogan.

Xi's vision for the next term

On Wednesday, China's state broadcaster CCTV reported Xi made comments in a special two-day meeting in Beijing, in which he laid out his vision for "the next five years."

Xi reportedly said the Communist Party of China's congress meeting will offer "two-stage strategic plan for China's drive to build a great modern socialist country in all respects, and will in particular lay out plans for the strategic missions and major measures in the next five years."

"Xi called for efforts to focus on tackling unbalanced and inadequate development, and work on new ideas and measures to address problems," the broadcaster said.

There is no doubt Xi will get confirmed, said Roche, "but if he is going to complete his term in office, he has to make real progress on ... social peace. And I think it's a big, big challenge."

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