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Xi is expected to meet significant economic challenges when he joins an unprecedented third term

Xi is expected to meet significant economic challenges

Aug 01, 2022: -President Xi Jinping will require to confront China’s several significant economic challenges after he confirms a widely expected unprecedented third term in office, veteran investor David Roche said.

Roche added Xi would probably “sail through” his confirmation as China’s top party chief in the upcoming National Congress meeting, setting the stage for him to secure another five-year term as the leader.

There won’t be any “real resistance to him at senior levels of the communist party,” counted at the Congress party meeting 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 on Thursday.

He said that China’s economy is slowing down with growth likely to settle around 3% to 4%, adding it’s ″partly conditioned by the legacy problems of debt and bad assets and partly prepared by demography and low productivity.”

China’s 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 expand by 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 worsening China’s property market. The investment bank slashed its earnings outlook for the index to zero growth, down from previously 4%.

Roche said China’s economy is struggling with “enormous real estate 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 hitting the concept of common prosperity, which is the main ticket,” he added.

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

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