Investors know it is important to note quarterly financial reports. The pace of those results for the second quarter picks up in the week ahead. Dozens of companies will release their latest 90-day report cards.
But in China, the government begins a ritual held only every five years. And it, too, could exert influence on global markets and investors of all sizes.
The National Congress of the Communist Party of China starts Wednesday at a beach resort east of Beijing. In the highly orchestrated spectacle that passes for China’s political class, the strategic directions and tactical policies that will result in the months and years ahead from the meeting likely will further fortify one man’s vision for the world’s second largest economy — President Xi Jinping.
Xi is expected to be reappointed for another five-year term and consolidate his hold on power by installing more loyalists within the inner circles of the Community Party. In his first five years, Xi has prioritized economic stability over financial reforms. His government spent $236 billion bailing out the stock market in 2015. Chinese stocks plunged that summer after a big run-up in stock prices fueled by borrowed money from Chinese banks.
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That same summer, despite years of saying it wanted to move toward a more market-valued currency, the government devalued the yuan. That decision came after a drop in Chinese exporting. A weaker currency makes Chinese goods cheaper for international buyers, including the U.S.
These actions hurt U.S. stock indices at the time, but markets have since recovered and gone on to set record highs. Still, how China manages a slower growing economy and transitions from export focused fixed asset spending (roads, airports, plants) to a consumer and service oriented economy will ripple through investor portfolios.
Tom Hudson hosts ‘The Sunshine Economy’ on WLRN-FM; @HudsonsView.