China enters an era of one-man rule - a chart that reads "Xi Jinping has filled China's top leadership body with loyalists"

The economy-first orientation that underpinned China’s growth for the past few decades is about to change

With the conclusion of the party congress, MNCs should prepare to face a more challenging business environment. Many of the policy shifts that Xi initiated over the last several years will accelerate and intensify.

China will tilt toward state-led growth with more controls in all aspects of society. To start, Xi’s “common prosperity” agenda is likely to lead to a less friendly regime for wealthy Chinese and large private enterprises in selected sectors, especially those offering products or services that promote a high-end, luxurious lifestyle that could be perceived as out-of-touch with ordinary people. His intensifying focus on dual circulation signals less willingness to rely on foreign companies for capital, technology, and management skills. When necessary, the government will not shy away from targeting MNCs by adjusting capital flow rules. The shift to more self-reliance is also likely to raise pressure on MNCs to transfer technologies to Chinese partners in exchange for market access; it may even fuel a rise in cybersecurity breaches and corporate espionage activities. The overall goal will be to develop home-grown advanced technologies, with billions set to pour into high-tech R&D, in the hope of developing world-class technologies that will eventually displace foreign competitors.

Given that security is now a much bigger concern of the new leadership, China will be more hawkish in pressing MNCs to abide by its increasingly stringent data management rules. This, coupled with the existing Great Firewall, will make data transfers across an increasingly balkanized global data system even more difficult. Already, some MNCs have built separate data centers inside China to hold information domestically at the request of the Chinese government, creating additional friction for their cross-border data management. These frictions are likely to intensify in the coming years.

Most MNCs that have operated with little disruption in the Greater China region over the past few decades will find themselves caught in the rising geopolitical tensions between China and the West in one way or another. As a result, firms that intend to remain active in the region over the long term should actively evaluate political risks and consider how they would respond to a serious escalation of tensions between China and the West or an attack on Taiwan.


  • China’s twice-in-a-decade party congress ended on October 22. During the event, Xi Jinping officially secured a third term as the party’s general secretary, breaking decades-old rules designed to promote collective leadership and prevent a return to one-man rule. 
  • Xi also unveiled a new leadership team packed with people seen as loyal to him. He pushed out all previous leaders seen as pro-market and pro-reform, including incumbent Premier Li Keqiang. 
  • Li Qiang, currently Shanghai’s party boss, is set to become China’s next premier despite being responsible for the city’s controversial lockdowns earlier this year. His promotion clearly indicates that economic growth is no longer the primary KPI for officials.
  • The new politburo’s composition shows that Xi is in complete charge of the party and will now implement his policies with little opposition. He has arguably become China’s most powerful leader since Mao Zedong.

Our View

When Xi Jinping emerged with his new leadership team over the weekend, it became clear how completely he had consolidated his power. There will be little dissent when he implements his policies over the next five years. Xi is more ideologically driven than his predecessors and will likely waste no time in pushing ahead with his “common prosperity” agenda, through which he hopes to distribute wealth more equally in China. His third term will also see the state play a much more dominant role in China’s economy, as he pursues a dual-circulation strategy aimed at achieving self-reliance in critical realms, such as semiconductors. The economy is no longer the government’s primary concern; security considerations are becoming increasingly important in Beijing. Xi will be prepared to sacrifice a bit of growth in order to achieve his political goals. More controls, in forms both physical and digital, are on the way.  

On the global stage, China is likely to become even more assertive in the coming years. There is no immediate prospect for tensions between China and the West to ease. Instead, they are likely to rise, particularly as frictions increase across the Taiwan Strait. As its new leaders stand more firmly against the Western world, China is likely to be more closed than before, leading to fewer interactions in almost all aspects of its relationships, from people and capital to data and information.

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