Eight is an auspicious number in Chinese culture. That’s because in the Chinese language, the characters for "eight" and "prosperity" sound very similar. That’s why it’s considered lucky to have more eights in your phone number, on your car number plate or in your address.

President Xi Jinping has been running China for some eight years now, heading an administration that has put the "Chinese dream" and national "rejuvenation" at the heart of its policies. Since he became president in 2013, the country has experienced tremendous change — some we welcome, others have been more controversial.

With Xi in charge, foreign investors have flocked to China’s stocks and bonds following years-long efforts to liberalize those markets. Lately, a series of high-profile regulatory interventions to curb the influence of a number of industries has sparked soul searching around the risks of investing in Xi’s China.

The first in our series of research papers, China in context: the benefits and constraints of a state-led approach,seeks to explore the implications of Xi’s China for investors. It sets out the underlying drivers of recent policy and regulatory shifts, with a particular focus on how and why China’s approach to managing economic and social challenges has changed.

We believe these policy interventions represent an evolution, not a revolution, in Xi’s approach to governing and policymaking. While his approach differs from that of his consensus-driven predecessors, the seeds were sown early in this administration.

Key takeaways:

• While China shares traits with other countries, the sum of its parts is unique

  There’s nothing in past growth models that sets out a clear roadmap for China’s future development. This presents challenges for Chinese officials when looking for policy precedents, for world leaders struggling to accommodate China’s rise and for investors trying to navigate its complexities.

• Xi faced many challenges at the start

  He needed to: tackle political corruption and inefficiencies in the banking system and capital markets; rebalance the economy and address the negative environmental and social consequences of a growth-at-all-costs model. China needed to become a technology leader while managing growing trade and security tensions with other global powers.

• His approach to governing cements the state-led approach

  While embracing innovation, Xi has advocated for more state control in social and economic affairs and he has been more prepared to intervene when firms were seen to compromise social stability. He has proved less tolerant of dissent and threats to Chinese Communist Party control. He has also been more prepared to assert China’s interests in foreign affairs.

• Xi’s record has been mixed

  The anti-corruption campaign and opening of domestic capital markets have been the most successful. Financial de-risking and climate policy have yielded important benefits, although progress has been uneven and much more needs to be done.

  On climate policy, questions linger over China’s ability to honor its international commitments as coal remains an important energy source. That said, the share of zero-carbon technologies in domestic energy production is growing fast, while China is the leading supplier of low-carbon technology products to the rest of the world.

  The "Made in China" initiative has helped domestic producers and exporters move up the value chain. But this initiative and a broader reluctance to soften the controlling hand of the state are also representative of the world’s more mercantilist turn that is undermining the gains from trade.

  The Belt and Road Initiative, as well as China’s more active role in international institutions, is more befitting of its economic footprint. However, other security minded actions in both the foreign and domestic arenas are leaving the country more politically isolated.

  More generally, although trend growth has continued to slow, China has remained one of the fastest growing economies in the world and avoided the hard landing many analysts had warned of.

• Success or failure can’t be assumed

  Neither success nor failure can be assumed when analyzing the latest Chinese policy initiatives, whether viewed in terms of their growth or investment consequences.

"Good but could do better"

While the past eight years may not have been "lucky," Xi Jinping’s report card for this period could probably be summed up as "good but could do better." The economic and political challenges that face China today are as great as they were at the beginning of his presidency.

There have been missed opportunities to reform the underdeveloped welfare and tax systems. Smaller companies still struggle to compete on an even playing field against favored state-owned enterprises. Meanwhile, free movement of labor is constrained by decades-old rules that prevent rural migrants from settling in the most desirable cities.

More challenges lie ahead if Xi, as people expect him to, opts to stay in the driver’s seat for many years to come.

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