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Xi’s Power Grab Spurs Historic Market Rout as Foreigners Flee
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Stocks, yuan extend losses on Monday as Party congress ends
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Traders worry leadership filled with Xi allies may disappoint
By Bloomberg News
October 24, 2022, 12:57 AM UTCUpdated on October 24, 2022, 8:44 AM UTC
Summary
A sense of exasperation swept across Chinese markets as President Xi Jinping moved to stack his leadership ranks with loyalists, with stocks capping their worst day in Hong Kong since the 2008 global financial crisis and the yuan weakening to a 14-year low.
The Hang Seng China Enterprises Index, a gauge of Chinese stocks listed in Hong Kong, plunged 7.3% in its worst showing after any Communist Party congress since the inception of the index in 1994. Foreign investors fled mainland markets, selling a record amount of equities via trading links in Hong Kong and fueling a nearly 3% loss in the CSI 300 Index. The onshore yuan fell as much as 0.6% to the weakest since January 2008.
Read more: Xi’s Total Control in China Injects More Risk Into Chaotic World
The market meltdown following the reshuffle, which highlighted Xi’s unquestioned grip over the ruling party, shows deep disappointment over a likely continuation of policies staked on Covid Zero and state-driven companies. Tech giants Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Meituan all tumbled more than 11% as investors remained skeptical that Xi and his allies will seek a rejuvenation of private enterprise.
“The market is concerned that with so many Xi supporters elected, Xi’s unfettered ability to enact policies that are not market friendly is now cemented,” said Justin Tang, head of Asian research at United First Partners.
While the appointment of Xi’s allies to key posts may help accelerate major agendas, the addition of Covid Zero advocates to the Politburo Standing Committee diminishes the chance of any early loosening of Covid restrictions.
Foreigners sold a net 17.9 billion yuan ($2.5 billion) of mainland shares via trading links with Hong Kong on Monday, a record since data going back to 2016.
The swoon in Chinese stocks stands in contrast to global shares, which had their best weekly performance since July last week. The Hang Seng China index is trading at the lowest relative to the S&P 500 since 2001, according to data compiled by Bloomberg.
A slew of China’s key economic data – released Monday after abrupt delays last week — showed a mixed recovery. The economy grew faster than expected in the third quarter with industrial activity improving despite Covid restrictions and a property slump, but retail sales weakened.
Economists remain wary about future growth given the rolling Covid lockdowns. Authorities suspended in-person schooling and dining-in at restaurants in a district at the center of Guangzhou, stoking concerns about potential disruption in the southern manufacturing hub.
READ MORE:
- Xi Allies Fill China’s Top Jobs in Move Toward One-Man Rule
- Xi Says China Economy Is ‘Resilient,’ Will Deepen Global Links
- China Economy Shows Mixed Recovery as Unemployment Ticks Up
“Panic Selling”
“The Hong Kong market is seeing a panic selling moment,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “While China reported macro data that beat expectation, the market is on a way down, as the leadership reshuffle and tensions between China and US continue to drag down sentiment and adds uncertainty.”
In the currency market, the onshore yuan is nearing its weak end of the 2% trading limit around the fixing again, signaling a rise in bearish sentiment toward the currency. The People’s Bank of China set the fixing at 7.1230 per dollar on Monday, weaker than the recent pattern of near 7.11 per dollar.
China’s high-yield dollar bonds, dominated by notes sold by real estate firms, dropped about 1-3 cents on the dollar on Monday, according to credit traders.
The onshore credit market, however, is a rare bright spot. Some key onshore corporate-bond yields have been at their closest levels to comparable Chinese government debt in about 15 years, boosted by a slew of easing measures to support a slowing economy.
“The market situation currently might be the worst I’ve even seen in my career. Sentiment is even worse than the 2008 global financial crisis,” said Harris Wan, vice president at iFAST Global Markets.
— With assistance by John Cheng, Wenjin Lv, Jeanny Yu, Charlotte Yang, Lin Zhu, Tania Chen, Dorothy Ma and Alice Huang
(Updates with market closing prices, new comment.)
Guy
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This is the best article you will find on China’s new policy shifts. GuoGuang Wu was advisor to Zhao Ziyang and one of most reliable authorities on the workings of Chinese government
First, China will “struggle” to control, harness, and contain market mechanisms, which were introduced and promoted by the CCP after Mao, and their ramifications in all spheres of social life. This effort has already begun, as evidenced by increasing state repression of the private sector, and will unquestionably continue. The intention is clear: Although China depends on the market economy in order to prosper, certain social, legal, and political requirements of market activities may challenge the one-party dictatorship. From Deng Xiaoping to Jiang Zemin to Hu Jintao, CCP party leaders have always tried to contain those elements while promoting the market. Xi believes that the regime has now reached the critical juncture at which the party-state must establish thorough and absolute command of the market.
Second, China will no longer “follow the United States,” as it had under Deng Xiaoping, and will instead comprehensively challenge its rival. Deng had seen those Asian countries that emulated the United States economically prosper, yet he also believed that the CCP regime had “political advantages” over U.S. democracy and had no intention of adopting American political institutions. Xi, however, wants to go further to actively mounting a challenge. His regime’s rivalry with the United States will not be limited to superpower competition, and will extend to the arenas of international institutional arrangements and ordinary people’s daily lives all over the world.
And third, rather than promoting “peaceful reunification” with Taiwan, Xi’s CCP is planning a takeover by any possible means, and to that end is speeding up China’s military preparation for actualizing “entire unification of the motherland.” China’s Taiwan policy in the past decades was strongly connected to the CCP’s economy-centered program. And Taiwan’s contributions to China’s early post-Mao economic development were huge and critical, especially in terms of capital, trade, management, and technology. Now that China has become exponentially more powerful, however, why not turn Taiwan into a PRC province and incorporate the Taiwanese economy into its own?
The CCP’s Twentieth National Congress is clearly a turning point. With it, Xi has turned the Party’s post-Mao oligarchic dictatorship into a neo-totalitarian tyranny with himself as the “core.” But the change will be felt more broadly and deeply than a critical shift at the top of elite Chinese politics. The PRC that puts the economy first is no more, and it is a harbinger of greater changes to come.
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Everyone runs.
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Yes, you read this right: it’s trillion.
Guy
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To be expected. It’s just potential value. China is moving away from market economy
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That’s what I’ve read as well. Xi gonna go with centralize govt control on a massive scale, down to the economy, to stave off capitalism. Primarily at the whim and direction of a single man.
We live in curious times.
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An interesting broadcast online stated tbat much of the Russian oil exports to China come from Siberia. The extraction of which Russia doesn’t have the know how…but Haliburton, Exxon, etc, do. And they all just left Russia.
Very interesting times ahead. Zero covid lockdowns might come in handy next year just to maintain order.
(total speculation with little real knowledge on my part…just saying)
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After the party congress, Kevin Rudd speaks:
The Return of Red China
Xi Jinping Brings Back Marxism
By Kevin Rudd
Foreign Affairs
November 9, 2022
Chinese President Xi Jinping voting during the 20th Party Congress in Beijing, October 2022
Tingshu Wang / Reuters
Summary
In 1978, Chinese leader Deng Xiaoping announced that his country would make a break with the past. After decades of political purges, economic autarky, and suffocating social control under Mao Zedong, Deng began stabilizing Chinese politics, removing bans on private enterprise and foreign investment and giving individuals greater freedom in their daily lives. This switch, termed “reform and opening,” led to pragmatic policies that improved Beijing’s relations with the West and lifted hundreds of millions of Chinese people from poverty. Although China remained authoritarian, Deng shared power with other senior party leaders—unlike Mao. And when Deng left office, his successors continued down much the same path.
Until now. During the 20th National Congress of the Chinese Communist Party (CCP) last month, Chinese leader Xi Jinping brought the Deng era of Chinese politics to a definitive close. In many respects, it was clear that “reform and opening” was on its way out at the 19th Party Congress in 2017, when Xi proclaimed “a new era” in which the party would rectify the ideological, political, and policy “imbalances” left over from his predecessors. But it was the 20th Party Congress that gave Xi an unprecedented third term as leader and removed pro-market officials from the CCP’s leadership. It even removed Xi’s predecessor from the proceedings. After nearly 44 years, history will record that it was this congress that administered the last rites to Deng’s reformist era. The brave new statist world of Xi Jinping is now in full force.
That means foreigners must set aside the comfortable analytical frameworks many of them have used to analyze China for the last two generations. Most countries, including many in the West, are predisposed to think that when China’s leaders speak in ideological terms, it is not to be taken seriously (or that if it is, the ideology purely applies to the party’s domestic politics). But that is no longer the case. As I wrote in Foreign Affairs shortly before the party congress, “Under Xi, ideology drives policy more often than the other way around.” He is a true believer in Marxism-Leninism; his rise represents the return to the world stage of Ideological Man. This Marxist-Nationalist ideological framework drives Beijing’s return to party control over politics and society with contracting space for private dissent and personal freedoms. It also drives Beijing’s born-again statist approach to economic management, and its increasingly assertive foreign and security policies aimed at changing the international status quo.
Xi has used the 20th Party Congress’s “work report” (a speech the CCP’s top leader delivers at each congress outlining the ideological and policy rules of the road for the next five years) to demonstrate to the party and the world that China now has an integrated national and international vision of what he calls “Chinese-style modernization.” This vision calls for decoupling economic modernity from Western political and social norms and underlying cultural beliefs. It offers a new international order anchored in Chinese rather than U.S. geopolitical power. And it involves creating a set of institutions and norms that are compatible with China’s own interests and values rather than with those of the West. It is a Manichaean worldview, pitting China’s blend of Confucian and Marxist-Leninist values against the liberal democracy and liberal internationalism of the West and some (but not all) of the rest of the world. As this congress made clear, Xi wants to demonstrate that the CCP under his leadership has both the audacity and the capacity to translate this bold new vision into reality.
THE PEN AND THE SWORD
In the Chinese Communist Party, words matter. The frequency with which various terms and phrases appear in major reports and speeches is a critical interpretive mechanism that both party members and outside observers use to discern the leadership’s changing directions. Mao’s famous attack on “capitalist roaders,” for example, went along with the party’s overwhelming nationalization campaigns and its opposition to small-scale private enterprises. Jiang Zemin’s ideological writings on the “three represents”—which included a need to harness the Chinese economy’s “productive forces”—was a clear signal to party leaders to bring private entrepreneurs into the party’s ranks (which they then did).
Xi’s phrases and word choices have similar real-world consequences. And the 20th Party Congress’s work report, delivered by Xi, is replete with a range of new and continuing ideological banner terms. In aggregate, they indicate that the CCP is now weighing the economy, national security, and the country’s nationalist identity in different ways. In the report that came out of the 14th Party Congress in 1992, when Deng still ruled, the term “economy” was used 195 times. In this year’s report, the economy is cited on only 60 occasions. Deng’s mantra of “reform and opening” was mentioned 54 times in 1992; at the 20th Party Congress, the phrase was invoked on only nine occasions. In 1992, the term “national security” appeared once, and it was used just four times in 2012. But at the 19th Party Congress in 2017, Xi’s first as leader, the term had 18 appearances. This year, it is mentioned 27 times. Meanwhile, the Chinese term for powerful state, qiangguo , appears 23 times this year, compared with 19 in 2017 and only two in 2002. Overall, these changes indicate that the party is now focused on Chinese nationalism and national security. This is a sharp break from previous regimes, which were almost exclusively preoccupied with economic development.
The term “Marxism” also makes multiple appearances in the 2022 report, and it is surrounded by other language suggesting that Xi is girding for conflict. The Marxist-Leninist concept of “struggle”—striving through violent or nonviolent means to resolve what Marxist-Leninists deem to be “contradictions” in domestic and international society, is mentioned 22 times. By ideological definition, the concept authorizes Xi to engage in various forms of confrontation to advance his revolutionary cause. And the leader’s report was followed by an intensive propaganda campaign, for both public and internal party consumption, on the need for China to prepare for the difficult times by toughening its “spirit of struggle.” This struggle is not limited to the party’s challenges on the home front (including potentially within the party itself). It is also directed to China’s challenges around the world, including with the United States.
The brave new statist world of Xi Jinping is now in full force.
The growing advocacy for “struggle” was underscored by Xi’s decision to take the newly elected Politburo Standing Committee—China’s highest political body—on a visit to Yan’an after the congress ended. Yan’an was where Mao was based for part of the first civil war against the Chinese Nationalists and most of the war against Japan. It is also where he convened the Seventh National Party Congress in 1945, which confirmed his absolute leadership of the CCP after his own political struggle against internal party opponents over the previous decade. That meeting was also the precursor to the party’s second civil war against China’s Nationalist government, which ended when the anti-Communist Nationalist leader Chiang Kai-shek fled to Taiwan with the remnants of his regime. The political resonances of Xi’s Yan’an visit, then, are relatively clear. Like Mao, Xi has emerged triumphant after his own decade of relentless power consolidation, often through violent internal conflict. And now he is preparing for China’s renewed long-term struggle against the old enemy: the separatists in Taiwan.
The CCP was previously hesitant to embrace any kind of public timetable or deadline for retaking Taiwan. Xi, by contrast, has stated that retaking Taiwan is critical to China’s “national rejuvenation” and that he aims to complete that rejuvenation by 2049. Xi’s predecessors during the period of reform and opening believed that if China wanted to develop economically, the country needed good relations with the rest of the world, so they never entertained the idea of fighting to take the island. Previous party congress reports contained a standard reference to “peace and development” as the major underlying trend of modern times, signaling that China did not face any threat of major war and could therefore make economic development its central priority. Beginning in 2002, reports also routinely declared that China was experiencing a “period of strategic opportunity,” or zhanlue jiyuqi : a phrase indicating that the United States’ military distractions in the Middle East provided China with even less international pressure and therefore more space to focus fully on rapid development.
Neither of these standard expressions appear in the 2022 report. Instead, the document describes a “severe and complex international situation” in which the party must be “prepared for dangers in peacetime.” It also says that China should be preparing for “the dangerous storm,” or jingtaohailang . It calls “national security” the “foundation of national rejuvenation.” And Xi used the report to ingrain his earlier statements about the need for a “total security” agenda to ensure that the country has ideological security, political security, economic security, and strategic security. Indeed, it calls for the “securitization” of virtually every aspect of society. He also directed the party to apply this concept of total security across all of the party’s internal processes. Xi, it seems, is signaling that the CCP and China’s People’s Liberation Army must now be ready to fight a major war. And domestically, that means keeping the Chinese people under even tighter surveillance and control.
SERIOUSLY AND LITERALLY
In addition to these broad ideological shifts, the 20th Party Congress rubber-stamped a number of significant political and personnel changes. The party constitutionally entrenched Xi as “the core leader of the Central Committee” and declared “Xi Jinping Thought on Socialism With Chinese Characteristics for a New Era” to be “the new Marxism of the 21st century.” It removed more reform-minded party officials who had sometimes disagreed with Xi, such as Premier Li Keqiang and Wang Yang, from the Politburo Standing Committee, and it removed the reformist Hu Chunhua from the wider Politburo—even though none of them had reached the retirement age of 68. Meanwhile, the congress allowed other political loyalists over the retirement age to stay. (One of them, Zhang Youxia, the vice chairman of the Central Military Commission, is already 72.) And while it is still unclear exactly why Hu Jintao, Xi’s immediate predecessor, was unceremoniously ejected from the proceedings—an incident captured on video that has been endlessly dissected in recent weeks—it is clear that Hu was unhappy with his reformist protégés being summarily dismissed from the country’s central leadership. Given the precise dynamics of that day, the act of Hu being marched off the stage was rich with symbolism. China under Xi is now very much a one-man show.
Political consolidation isn’t the only way in which Xi is reproducing parts of the Maoist playbook. He is also intent on pushing China’s economy away from market-based capitalism and back toward statism by rehabilitating state-owned enterprises and designating the state as the primary driver of technological innovation. He has followed through on that designation by pumping hundreds of billions of dollars into already vast state “guidance funds” for specific technologies such as semiconductors. (The United States has followed suit by enacting its own industrial policy through the CHIPS and Science Act.) Xi’s Marxist economic turn is underscored in his work report’s emphasis on the need for “common prosperity” and in its directive for China to find ways of “regulating the mechanisms of wealth accumulation.”
The work report states that party members are now required to “grasp both the worldview and the methodology of Marxism-Leninism” and apply the “analytical tools of dialectical and historical materialism” to understand “the great challenges of the time.” In reinforcing once again this traditional Marxist ontological and epistemological framework for understanding and responding to the world, Xi has also called on the party to “develop a new form of human civilization.” This now extends to Chinese foreign policy, where Beijing is increasingly comfortable using pressure, leverage, and force. At the congress, Xi promised “an increased capacity for the army to win,” an “increased proportion of new combat forces,” and more “actual combat training.” In a new and particularly disturbing formulation, he declared in his work report that his administration had “acted with resolve to focus the entire military’s attention on preparing for war.” He said that Beijing had “coordinated efforts to strengthen military struggle in all directions and domains.”
These ideological shifts, the accompanying political rhetoric, and the resulting new policy directions make it clear that China is now breaking from decades of political, economic, and foreign policy pragmatism and accommodationism. Xi’s China is assertive. He is less subtle than his predecessors, and his ideological blueprint for the future is now hiding in plain sight. The question for all is whether his plans will prevail or generate their own political antibodies, both at home and abroad, that begin to actively resist Xi’s vision for China and the world. But then again, as a practicing Marxist dialectician, Xi Jinping is probably already anticipating that response—and preparing whatever countermeasures may then be warranted.
Guy
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From the article you linked.
No wonder they have been practicing stay home drills for three years.
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Meanwhile in California:
“Your China Dream is not my dream.”
Guy
So the poster wasn’t translated correctly. The English and Chinese don’t mean the same.
One poster is hardly a big rejection of anything.
It’s something… but it could just as easily be students from Hong Kong, or students who have lived in the states since they were like 5 and are more American now than Chinese. At least it’s not a woke poster equating all criticism of Xi and CCP with racism, or the usual brainless shit you see hanging from boards on college campuses nowadays.