China’s Economic Pivot: Xi’s Symposium Signals Policy Direction

China’s Power Play: Symposium Signals Market Shifts and Investor Reactions

On Monday, February 17, China hosted a symposium on private enterprises. Economists closely analyzed the seating arrangement, interpreting it as a sign of influence among business leaders.

Hao Hong, a leading economist, shared an image of the seating arrangement, noting:

“In Chinese culture, seatings in the middle and upfront are typically reserved for the more important audience. The entire Chinese investment community is now busy identifying the seating arrangement from the back of the heads … it involves much judgement, and this is something that AI can’t do.”

Notably, executives from Qi An Xin Technology Group (688561), BYD Co. Ltd. (002594), New Hope Liuhe Co. (000876), Tencent (0700), and Zhejiang Chint Electrics Co. Ltd. (601877) were seated front and center, facing President Xi Jinping. Other attendees included Alibaba, Huawei, Unitree, and Xiaomi.

Baidu’s (9888) was notably absent. Baidu tumbled 6.94%, but analysts suggested that the decline was not linked to its absence.

Key Takeaways from the Symposium:

• China has a strong foundation for promoting the private economy’s high-quality development.
• Challenges facing private enterprises are temporary and can be overcome.
• The Communist Party and the State ensure equal market access, competition, and legal protection for all forms of economic ownership.
• Policies supporting private enterprises will be consistently upheld.
• Businesses must unify efforts, strengthen confidence, and drive sustainable growth.
• Now it’s time for private enterprises and entrepreneurs to showcase their talents.

NPC Standing Committee Meeting Approaches

After the high-profile symposium, the focus shifts to the National People’s Congress (NPC) Standing Committee Meeting scheduled for February 24-25 in Beijing.

The NPC Standing Committee Meeting will allow lawmakers to prepare an agenda for March’s third session of the 14th NPC. In March, lawmakers are expected to discuss economic reforms, fiscal policies, and key government initiatives, including the Five-Year Plans.

Brian Tycangco, editor and analyst at Stansberry Research, commented:

“All eyes on this after Xi met with Jack Ma and other China tech sector leaders today. Something’s cooking.”

Measures to foster innovation and economic growth will be crucial as consumer sentiment continues to impact domestic consumption.

US and China: Economic Divergence Accelerates

As Beijing attempts to reboot the economy, the threat of a US-China trade war continues to influence sentiment.

The Kobeissi Letter recently highlighted the growing divergence between the US and China’s economies, stating:

“China’s 10-year government bond has returned +20.9% since the beginning of 2022. By comparison, the US 10-year Treasury note has declined -13.4%. This comes as China’s 10-year bond yield has plummeted -122 basis points while the US 10-year note yield has risen +300 basis points. China’s economic slowdown and ~2 years of deflation have been behind the slump in yields. Conversely, economic resilience and elevated inflation have driven the rise in the US yields. The world’s largest economies are heading in opposite directions.”

The shifts in the respective bond markets have also influenced USD/CNY trends. The USD/CNY advanced by 0.13% on Monday, February 17, closing the session at $7.2624. The USD/CNY surged from $7.0990 on November 5 to a mid-January high of $7.3327 before easing back to around the $7.25 level.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on China’s economic transition, saying:

“The only way out for China is to produce less. It will be very painful. Nobody is going to take your products forever. So it’s just a choice: if you want to create more welfare, more growth, then you need to consume more.”

Economists see China’s shift from a production-driven model to a consumption-based economy as key to sustainable growth.

Market Trends: Mainland Markets Trail Hong Kong

Despite growth in AI-driven sectors, Mainland China’s markets continue to face pressure from U.S.-China trade tensions. Year-to-date:

• CSI 300: +0.32%.
• Shanghai Composite Index: +0.12%.
• Hang Seng Index +12.98%.

The Hang Seng Index has outperformed its Mainland peers on AI-sector gains in Hong Kong-listed tech stocks. Alibaba (9988) leads the charge, soaring 48.30%.

Trade Talks and Beijing’s Next Moves

The outcome of US-China trade negotiations will be crucial. A prolonged trade war could derail China’s economic recovery, intensifying pressure on domestic demand.

With consumer spending already under strain, Beijing faces mounting urgency to implement effective policy measures to counteract US tariffs.

Don’t miss our latest in-depth coverage—see what’s next for China’s economy and markets here.