News that Chinese communist leader Xi Jinping would assume a third term in power sent markets into a dive on Oct. 24, marking a broader pessimism that the leader’s policies will have negative consequences for the global economy.
Hong Kong’s benchmark Hang Seng Index fell by more than 4.5 percent, and a sub-index of Chinese internet giants listed in Hong Kong and Shanghai tracked a 2 percent fall as foreign investors sold more than $1.3 billion in Chinese shares.
The economic fallout has brought the value of China’s yuan and stock market to the lowest levels seen since the 2008 financial crash in Hong Kong.
There have been numerous warning signs that the Chinese economy is becoming increasingly fragile under his rule, including weakening exports, decreasing demand for Chinese goods, and a crashing housing market, all of which have been exacerbated by his constant lockdowns of major cities due to COVID-19.
However, the trigger for the rapid market fall this week appears to be Xi’s unexpected move to further appoint authoritarian-minded loyalists to positions of power, raising fears that there will be no balance of powers within the CCP.
Contrary to hopes that he would at least make a nod to balancing factional powers within the Party, reform-minded Premier Li Keqiang and Vice Premier Wang Yang lost their seats at the seven-men Politburo.
Xi filled those seats with his own protégés, including Beijing Party chief Cai Qi and Shanghai Party chief Li Qiang. The latter had ordered weeks of COVID-19 lockdowns earlier this year in the Chinese financial hub, despite their devastating impact on the economy. He’s now tipped to become China’s next premier.
The selloff reflects investors’ fears that Xi’s centralization of power within the CCP will prioritize the state at the cost of the private sector and that the regime’s authoritarian practices will ultimately harm the Chinese economy in the long term.
