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

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

Slogans matter in China. From “socialism with Chinese characteristics” to “common prosperity” the adoption of new catchphrases can herald profound shifts in policy.

So, when “new productive forces” was listed as the top task in the government’s annual statement of priorities published March 5, it set off a scramble to decode what the elevation of the phrase – coined by President Xi Jinping last September — meant. Since 2014, there’s only been one other occasion where an industrial policy slogan has taken top billing. Typically, that slot has gone to pledges about macroeconomic policy.

State media tried to explain how the concept fits in with Karl Marx’s theories on production, while stock investors pounced on the idea that the catchphrase signaled a greater emphasis on the manufacturing of intelligent tools and machines. Shares of related firms, from humanoid robotics makers to producers of aircraft parts, rallied on speculation they will benefit from increased state spending and a growing market.

Yet, there is also a perception that the slogan is a repackaging of previous exhortations made in recent years for the nation to move up the value chain — such as “made in China 2025” and “seeking digital transformation.” The revamped language, investors say, will help emphasize to local officials that Beijing is as determined as ever to stay the course despite mounting economic challenges.

“This is old wine in new bottles,” said Cheng Hao, fund manager at Zhejiang Feiluo Assets Management Co., who’s added to his positions in commercial aircraft due to the renewed emphasis on value-added production. “A shift in industry and progress in technology takes a long time to bear fruit.”

Beijing is doubling down on the tech transition at a time when the country is embroiled in a deepening conflict with the US about access to technology. With the US pressing allies to further tighten restrictions on China’s access to semiconductors, obtaining sophisticated chips will be essential to Beijing’s push into artificial intelligence — one of the areas explicitly highlighted in the government’s work report as worthy of special consideration. In a further show of state support, on Wednesday Premier Li Qiang visited China’s AI leader Baidu Inc.

“The phrase is a new rallying cry for the party-state bureaucracy,” said Neil Thomas, a fellow on Chinese politics at the Asia Society Policy Institute’s Center for China Analysis. “As China’s growth trajectory becomes more uncertain, Xi’s big bet on productivity-enhancing technological change becomes more important.”

Other sectors singled-out in the report include electric vehicles, bio-manufacturing, commercial spaceflight, new materials, hydrogen power and quantum technology.

Brokerages are looking at what related industries may benefit. Orient Securities Co., for example, suggested makers of mechanical equipment used in automation stand to gain, as well as media companies using AI to lower costs in content creation.

Of course, all the energy put into guesswork can be overtaken by events — or by one slogan triumphing over another. In 2018, the “internet plus” model in health care and education was repeatedly referenced in the work program as a priority. Then in 2021, Xi began to ramp up mentions of “common prosperity”, a drive to address the country’s wealth gap. It heralded the start of a crackdown on the tech and education sectors which decimated the value of key companies like Alibaba Group Holding.

Despite that caveat, the power of the Chinese state to mobilize vast resources around favored industries means that trying to parse the meaning of the latest pronouncements is an unavoidable 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 aligned with the leadership’s goals that already have a scalable business model. Currently he’s betting on the solar industry.

“One characteristic of China is that they love creating slogans,” said Zhou. “But from an investment perspective, these slogans must be translated into real profits.”