SHANGHAI — Chinese President Xi Jinping’s commitment to the “dynamic zero-COVID-19” policy means luxury demand will continue to be impacted by disruptions in the next few quarters, according to the latest report from Barclays.
Xi stressed the policy will be ongoing during his two-hour speech at the twice-a-decade meeting of the Communist Party Congress. During his speech to the 20th congress, which kicked off in Beijing last Sunday, Xi also addressed topics including economic goals and Taiwan.
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Xi said he was committed to his zero-COVID-19 policy because “it has protected people’s lives and health to the greatest extent.”
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While this is likely to impact Chinese consumers’ luxury demand over the coming months, the Barclays report said that “some signs of normalization are more likely to appear by March 2023 after the second Congress of the Party.”
As the meeting wraps up later this week, Xi is expected to retain his titles as general secretary of the Communist Party and chairman of the Central Military Commission. He will likely secure the presidency during the annual National People’s Congress next March, giving him an unprecedented third term and solidifying his place in power.
On the economic front, Xi stressed that “development is a top priority” for the country. Xi reiterated China‘s ambitious plan to become a “medium-sized developed country” by 2035, which means doubling the size of its economy from its 2020 levels.
“We view this as a positive as there have been some concerns that this stance may have dropped off which would have signaled a major shift in China‘s policy to pursue other goals at the expense of economic growth,” Barclays wrote in the report.
“Common Prosperity,” a blueprint for Xi’s economic plans, was also emphasized during his talk. Areas of focus include expanding China’s middle class, regulating excessive income and developing rural areas.
“We maintain our view that an expanding middle class will support the growth of the luxury sector in the long term, and we do not expect an imminent luxury consumption tax, which would be contrary to China’s efforts in recent years to promote luxury spending repatriation,” according to the report.
On Taiwan, Xi said the country will “stand by the prospect of peaceful reunification with the utmost sincerity and effort.” But Xi also warned that China will not rule out the use of force or “all necessary measures” to achieve “the complete reunification of the nation.”