The 18th CCP Congress has concluded and China's new leaders, led by Xi Jinping and Li Keqiang, have been announced. Notably, only these two leaders will be able to serve two terms, whereas the other five members of the most powerful politburo standing committee will have to retire in five years due to the age limit. This will cement Xi and Li's power in the new government. Additionally, Xi has replaced Hu Jintao as the chairman of the military committee, which will further enhance Xi's role. This setting allows the new leadership to be in a much more powerful position to push for comprehensive reforms that are required to transform China into a medium- to high-income country in the next decade. A new era under new leadership has begun (see "China's new era under Xi Jinping" 15 November).

The new leadership will immediately face a challenging year ahead in 2013, as investment will suffer from over-capacity problems in the production sector, weak property demand in Tier 2 and 3 cities, and increasing friction in infrastructure investment (see "No smooth sailing for the year ahead - Takeaways from the Mizuho macro day" 20 November).

Indeed, compared to the previous downturn sparked by the global financial shock in 2008- 2009, the magnitude of the current downturn is smaller; however, it could last much longer, due to four reasons: 1) Less decisive policy actions due to the leadership transition; 2) The banking system is still experiencing an overhang from the previous credit boom; 3) Local governments' fiscal conditions have deteriorated; and 4) China's advantage as a low-cost producer is diminishing (see "A tale of two downturns in 2008 and 2012" 10 October).

David Fuller's view In a command economy, the quality of governance at the very top is crucial. It is the earliest of days for the new leaders but Xi Jinping has more power than his recent predecessors and my instinctive impression (there is little else to go on to date) is that he is an interesting choice for China.

See also recent comments, starting with yesterday's, and Eoin's comments and report on an interesting Chinese sector below.