Fiscal Reality Limits his Power over the Economy
Summary
Most analysts believe Xi Jinping is likely to increase his power following the Party Congress on October 18 by strengthening his control over the Party’s Standing Committee. This, in turn, could give him the political freedom to institute economic reforms, including restructuring of state firms, and reduction of risk in the financial system. However, I believe that his power is limited by several factors: China’s decentralized economy, the power of central SOEs, and national fiscal demand for credit, from both corporates and consumers. Therefore, I expect few substantial changes to China’s economy. However, I do expect several policies to emerge where Xi has greater control.
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