- Observers are watching for signs on how China will continue to deal with longstanding issues caused by three decades of breakneck growth
- Beijing faces a challenging balance act between its economic and social stability goals
The once-every-five-years meeting began Wednesday, and it's expected to mark a further power consolidation for President Xi Jinping. But, the seven-day meeting may also provide hints about what his administration will do as the world's second-largest economy grapples with persistent concerns from three decades of breakneck growth.
On the surface, the gathering will likely "highlight the Party's long-term goals and key tasks for the next five years, which may stress the need to balance economic growth, structural reforms, income distribution and financial stability," Nomura's economists wrote in a recent report.
Beyond that, observers are watching for signs on how China will continue to deal with longstanding problems such as excessive corporate debt in state-owned enterprises, industrial supply over-capacity, concerns about a property bubble and environmental pollution. Results of official efforts to tackle the problems have been mixed as Beijing balances economic and social needs.
Some are hoping that a more powerful Xi will be able to push through structural and economic reforms more thoroughly, but there's also the concern that the government could revert to old habits.
"Traditionally economic activity, especially investment and credit growth, have tended to accelerate in the year after a Party Congress. We hope the Chinese political leadership will act differently this time," Emil Wolter, emerging markets portfolio manager at asset management group Comgest, wrote in a note.
That is, Wolter said there was a danger that Beijing would embark on a course of "lower quality" high-percentage GDP growth driven by government forces, rather than "better quality, self-sustained" lower GDP growth.
China is targeting growth around 6.5 percent this year, and is looking for similar numbers in the next few years as well. But analysts — many of whom have expressed doubts about the veracity of Chinese data to begin with — question if it's a wise plan to aim for such fast-paced growth.
The "artificially high" target doesn't leave much room for structural reforms, as growth is mostly propped up by external demand and government stimulus now, said Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments.
For his part, Wolf said he's skeptical that structural and market reforms will eventually play out after the Congress.
On Monday, the People's Bank of China quoted its governor, Zhou Xiaochuan, as saying the world's second-largest economy is likely to post growth of 7 percent in the second half of the year thanks to rapid household spending. First half GDP growth was 6.9 percent and third-quarter GDP numbers will be released on Thursday.