Because of fears about President Xi Jinping’s consolidation of power, foreign investors are pulling billions of dollars out of the Chinese economy.
Key Details
- Chinese markets are slumping following President Xi Jinping’s move to consolidate power during the 20th national congress of the Chinese Communist Party.
- “China’s lurch toward one-man rule has made it more important than ever for investors to align their portfolios with the priorities of President Xi Jinping. Some are deciding it’s not worth the trouble,” says Bloomberg.
- Investors are pulling out of Chinese markets, which resulted in a 7.3% plunge in the Hang Seng China Enterprises Index and a 3% loss for the CSI 300 Index.
- “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,” says Bloomberg.
- Foreign investors sold as much as $2.5 billion in Chinese shares on Monday.
Why it’s news
President Xi’s move has severely negatively affected the Chinese economy and sent it into one of its worst spirals since its financial markets started keeping track. Foreign investors are worried about the leader’s policies and aren’t willing to take chances.
“President Xi Jinping’s consolidation of power was seen as a major risk, with expectations that the leadership reshuffle would bring a continuation of key policies like COVID Zero,” says Bloomberg.
Xi defended the viability of the Chinese economy on Sunday and promised to invest in long-term growth.
“Foreign sentiment on Chinese stocks is low now. Markets may need to wait to closer to the Central Economic Work Conference in December to see how the new leadership will address China’s economic challenges,” Bloomberg continues.
“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,” says Bloomberg.