Decoding Xi’s new catchphrase aimed at reviving China’s economy


Slogans matter in China. Adopting new catchphrases from “socialism with Chinese characteristics” to “shared prosperity” could lead to profound policy changes.
So, when 'new productive forces' were listed as a top task in the annual statement of government priorities published on March 5, there was a rush to understand the height of this phrase coined by the President. Xi Jinping Means last September. Since 2014, there has been only one other occasion where the industrial policy slogan has been on top. Typically, that space has gone into pledges about macroeconomic policy.
State media tried to explain how the concept fit with Karl Marx's theories on production, while stock investors emphasized the idea that the catchphrase signaled a greater emphasis on the creation of intelligent devices and machines. Shares of companies ranging from humanoid robotics makers to aircraft parts makers rose on speculation they would benefit from increased state spending and a growing market.
Yet, there is also a perception that the slogan is a rehash of previous exhortations made in recent years to move the nation up the value chain – such as 'Made in China 2025' and 'exploring digital transformation'. Investors say the revised language will help emphasize to local officials that Beijing remains as determined as ever to stay on course despite growing economic challenges.
“It's old wine in new bottles,” said Cheng Hao, fund manager at Zhejiang Feiluo Assets Management Co., who has added to his positions in commercial aircraft due to the renewed emphasis on value-added production. “Changes in industry and advances in technology take a long time to bear fruit.”
Beijing is doubling down on technological change at a time when the country is locked in a deep conflict with the US over access to technology. US is pressuring its allies to tighten restrictions on China's access to semiconductors, it will be essential to obtain sophisticated chips to advance Beijing's artificial intelligence – one of the areas worthy of special consideration clearly highlighted in the government's work report. In another show of state support, Premier Li Qiang on Wednesday welcomed China's AI leader Baidu Inc. Visited.
“This phrase is a new rallying cry for the party-state bureaucracy,” said Neil Thomas, a fellow in China politics at the Asia Society Policy Institute's Center for China Analysis. “As China's growth path becomes more uncertain, Xi's big bet on productivity-boosting technological change becomes more important.”
Other areas highlighted in the report include electric vehicles, bio-manufacturing, commercial space flight, new materials, hydrogen power and quantum technology.
Brokerages are looking at what could benefit the respective industries. For example, Orient Securities Company suggested that manufacturers of mechanical equipment used in automation would benefit, as well as media companies using AI to reduce costs in content creation.
Of course, all the energy invested in speculating may overshadow events – or the triumph of one slogan over another. In 2018, 'Internet Plus' models in health care and education were repeatedly referenced as a priority in the work programme. Then in 2021, Xi Mention of 'shared prosperity', a campaign to close the country's wealth gap, began to gain momentum. This marked the beginning of a crackdown on the tech and education sectors, which eroded the value of major companies such as Alibaba Group Holding.
Despite that caveat, the power of the Chinese state to mobilize vast resources around favored industries means that trying to understand the meaning of the latest announcements is an inevitable part of the job for investment professionals.
Zhou Nan, investment director at Shenzhen Long Hui Fund Management Co., said he focuses on trying to identify sectors in line with leadership's goals that already have a scalable business model. At present he is betting on the solar industry.
“One of the characteristics of China is that they love slogans,” Zhou said. “But from an investment perspective, these slogans must translate into real profits.”

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