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China’s stock market fell on Monday as investors reacted to the news that not only did China’s President Xi Jinping win a third five-year term, but he also amassed the highest level of government with only a single individual. experienced one of the worst crashes in Loyal to him and his ideology.
The Hang Seng Index, which tracks stocks on the Hong Kong Stock Exchange, closed down 6.4%, its lowest level since 2009. Other stock indices in mainland China also plummeted as international investors withdrew $2.5 billion worth of his capital. Country, largest one-day outflow on record.
Experts believe the rush to leave came as it was confirmed that China would continue on the path envisioned by President Xi Jinping. This includes the ‘zero COVID’ policy, which has led to massive lockdowns and economic disruption, as well as the government’s continued involvement in the banking industry and the broader economy, which has left the country increasingly indebted. We are in crisis.
Also on Monday, China announced that its economy will grow at an annualized rate of 3.9% in the third quarter of 2022. This was slightly above expectations, but still falls short of the rate of growth needed for China to meet the government’s projections that the economy will grow. An increase of 5.5% for the full year.
The release of the economic growth rate was scheduled for last week, but was abruptly postponed, presumably so that news reports about it would not distract attention from a meeting of Communist Party leaders.
political bureau fuss
It was not surprising that Xi Jinping would break precedent and enter a third term, but with his inauguration came an unexpected turn of events for the Politburo Central Committee’s seven members. Xi has replaced his four members of all key policy-making bodies with men deemed loyal to him.
“What probably shocked quite a few people was the clean sweep at the Politburo Standing Committee,” Ian Johnson, a senior fellow in Chinese studies at the Council on Foreign Relations, told VOA. “He got all these people together who were basically his peers, and those who identified as more pro-market didn’t win seats and were sidelined.”
Among those elevated to the commission was Shanghai party secretary Li Qiang, who played a key role in the city’s controversial months-long COVID-19 lockdown earlier this year. Also promoted was Ding Xuexiang, Xi’s private secretary and powerful director general of the Central Committee.
Some who did not return for another term on the committee are seen as one of the more economically liberal thinkers among China’s leaders and once seen as a possible successor to Xi. Hu Chunhua was there. Hu’s resignation made it abundantly clear that there was little backlash against Xi’s economic policies against the newly formed commission.
Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note to clients at Capital Economics, “Political ties increasingly take precedence over technocratic experience, which could undermine the quality of policy implementation. pointed out. “And dismantling the remaining checks and balances will make it harder for the party to turn around if Xi Jinping’s policy agenda falters.”
focus on security
Xi laid little groundwork in announcing new initiatives or modifying existing ones in his remarks to Communist Party members gathered at the beginning of the multi-day rally.
He praised the country’s response to the pandemic and said it would not change its policies. He praised China’s extraordinary economic growth over the past decade, during which the economy has more than doubled in size.
While pledging to continue economic reforms and “open up” to the world, President Xi Jinping emphasized that state-owned enterprises will continue to play an important role in the economy and that the development of the private sector will be “led” by the state. Communist Party.
The main focus of his remarks was on national security. He painted a picture of a Chinese nation plagued by threats from both inside and outside, and promised to “resolutely safeguard the security of China’s state power, institutions and ideology, and build security capabilities in key areas.”
Disappointment in the business world
“We had hoped for a signal about the need to reset relations with the United States, but it looks like the uncertainty continues and could get worse,” said Doug, vice president of the U.S.-China Business Council. Barry told VOA in an email exchange: “The next inflection point could come when President Biden and President Xi Jinping meet in Bali next month. It accuses both of them of being pretentious.” It would be an ideal time to announce confidence-building measures without being overwhelmed.”
But Barry said positions in both Washington and Beijing appear to be strengthening, making compromises less likely in the near term.
“The good news is that while both imports and exports are off last year’s totals, probably due to COVID and China’s slowing economy, trade between the two countries remains good.” Now that we have it in our hands, we will soon be able to better understand what the future looks like.”
market realization
Johnson said Monday’s stock market reaction may have been the result of a somewhat belated recognition that China is unlikely to change course and become more market-friendly in the near future.
Over the past 30 years, investors have argued that despite China being a dictatorship, “China is run by people who understand how the international system works, and they have relatively investor-friendly policies. will figure it out.”
But now that assumption has “disappeared,” Johnson said.
“Beijing is still talking about reforms, trying to open up to the outside world, all sorts of things,” he said. “But there is no evidence of that.”
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