Xi's China, as it emerges from Communist Party Congress, leaves room for little doubt on the verdict of the markets. All in red le China bags. Xi Jinping prioritizes political stability and security even at the cost of sacrificing growth. Loyalty to the party line is better than competence And so, after acknowledging the appointments at the top of the country and the slowdown in GDP growth (+3,9% in the third quarter, 3% on an annual basis), operators they "voted with their feet", i.e. by reducing their investments in the Dragon: -1,7% on theCsi 300 index of Shanghai and Shenzhen, even -6,36% ad Hong Kong, the more sensitive to international investors, the worse for technology with spikes of -9% for Alibaba, but also for real estate securities. A disaster, in short, with all due respect to those managers (almost all to be honest) who had bet on a recovery after the Congress, thanks to the low level of inflation and monetary stimuli.
China's stock exchanges punish Xi today: too much control and low growth
But the indications coming from Xi's choices show that Beijing's priorities today are different. China has shelved once and for all the policy undertaken by Deng Xiaoping after the Tien An Men crisis which was based on two pillars: freedom of economic initiative, at the basis of the extraordinary growth from 1989 onwards; the dialectic at the top of the Forbidden City, centered on the collegiality of power. On the contrary, once Xi took total control of the situation, he promoted his closest collaborators: Wang Huning, the intellectual who for thirty years has been theorizing the decline of American power, e Li Qiang, the party secretary of Shanghai, responsible for the disastrous management of the zero Covid policy, rewarded for his loyalty.
Xi's news that the Chinese stock exchanges don't like
The innovations indicate the confirmation of an economic strategy based on supremacy of state industry on private initiative at the cost of reducing the rate of development and aggravating the increase in unemployment in the face of non-trivial problems of the red giant. China's immense effort since 2008, sponsored by Hu Jintao (thrown ignominiously in front of the cameras from the hall of Congress), or 580 billion dollars of the time ended up in infrastructures, often useless, or in the indiscriminate expansion of real estate are weighing heavily on Beijing's coffers: the debt, if including municipalities and other local governments, exceeds 300 percent.
After the Congress of the Communist Party of China, what changes for GDP and Stock Exchanges?
After the Chinese Communist Party Congress, the feeling is that:
- Beijing has neither the strength nor the will to push for increased consumption of raw material. Nor are there any bright prospects for theindustry, except for the one most linked to independence: defence, semiconductors and food.
- The temptation grows to weigh the military strength of the Dragon especially in the game with Taiwan.
- To define relations with Europe, a major trading partner in the years of globalization. Especially with the Germany. In a few days, Chancellor Olav Scholz will travel to Beijing to save what remains of the privileged relationship with China. Scholz signed at the time as mayor of Hamburg the transfer of a portion of the port to the Chinese. Other times, explains Politico. US pressure is growing. But not only. Carlos Tavares, CEO of Stellantis, has harshly criticized the opening of the EU (desired by the Germans) to the Chinese electric car.
- In short, another slice of global finance has gone up in smoke.
