Market Extra: Why investors are fleeing Chinese assets as Xi tightens grip on power

by | Oct 24, 2022 | Stock Market

China’s top leader, Xi Jinping, secured a groundbreaking third leadership term on Sunday and introduced a new Politburo Standing Committee stacked with loyalists in a clean sweep not seen since the era of Communist Party founder Mao Zedong.  Financial markets were rattled on expectations that Xi’s policy agenda of bolstering national security and the party’s political security would shift the world’s second-largest economy toward a more state-led model. That could make maintaining political ties and the party’s ideology a higher priority than achieving economic growth and policy reform, economists said.

The selloff in Chinese assets in part reflects expectations Xi will continue with the country’s zero-COVID policy, which has resulted in sweeping lockdowns in an effort to contain the virus, said Fawad Razaqzada, market analyst at City Index and Forex.com. “Investors are also worried that because of Xi’s loyalists being concentrated at the top of the decision-making body, there is the potential for more policy mistakes that could cause severe damage to the future path of growth. Xi will have a lot more say in how future policies will shape,” Razaqzada wrote. Chinese stock markets tumbled on Monday with Hong Kong’s Hang Seng
HSI,
-6.36%
ending more than 6% lower to a new 13-year low. Shares in mainland China also plunged on Monday, although not by as much. The Shanghai Compo …

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