PoliticsWhat to expect during China's leadership shuffle

The 19th National Congress begins on 18 October, and it is expected to set the policy agenda for the next five years. Some members of the Politburo Standing Committee, China's equivalent of a cabinet, may retire at the Congress, and a new generation of future leaders will likely be promoted.

CIO expects the government to sustain such growth by switching from the "old" economy to the "new" economy. (Keystone)

While top-level personnel changes are not highly publicized, a fairly consistent pattern is a strong political incentive to keep the economy growing steadily, said UBS Chief Investment Office (CIO).

"We do not expect the National Congress itself to move the market, which responds more to economic conditions, earnings growth and liquidity in China A-shares," said CIO analyst Elaine Zhou.

Here are some key things to watch for from the 19th National Congress:

• The importance of the Congress stems from the reassignment of key personnel, as well as early indications of who might be future leaders. The potential reassignment of the anti-corruption chief and current secretary of the committee will be in focus. While the anti-corruption campaign will no doubt be in focus, the top personnel changes could affect how it is carried out, as well as other government policies.

• The Congress should also set the tone for President Xi Jinping's second term (2017–2022). To achieve the goals he set out in his first term, i.e. doubling the national GDP and income by 2020 from the 2010's level, China has to keep expanding its economy by 6–7 percent annually over the next few years. CIO expects the government to sustain such growth by switching from the "old" economy to the "new" economy and by boosting consumption. The key beneficiary sectors from this trend will be consumer, IT and other new economy segments, such as clean energy, healthcare and Fintech.

• The agenda for restructuring state-owned enterprises (SOE) and deleveraging should also be monitored. CIO believes the government will work to ensure economic stability, which is needed for more sustainable growth over the longer term. CIO expects a sharp curtailment of off-balance sheet asset expansion at financial institutions (FIs) and private non-financial companies and stricter regulations being imposed on the still bubbly property market. CIO likes financials with stronger balance sheets such as big banks. Potential SOE reform candidates for the next round are mainly in the utilities, chemicals, materials, agriculture and special equipment (such as nuclear, aerospace, aviation industry and shipbuilding) segments.