When China’s supreme leader, Xi Jinping, moved to extend his rule, he expelled rivals who were seen as pro-business. He praised Marxism on the markets. He put security before the economy.
Now, with his grip on China tighter than ever, Mr. Xi begins an unprecedented third term this week poised to expand the Communist Party’s influence over the economy.
Mr. Xi’s belief in the party’s primacy could transform the world’s second largest economy into a more state-led model. Mr. Xi’s consolidation of power signals a new era in China in which national security and ideology will be a higher priority than maintaining robust growth. This could be bad news for an economy already dragged by official policies such as a strict “zero-Covid” strategy of lockdowns and mass testing.
Financial markets are already signaling unease about what Mr. Xi’s expanded base – and agenda – predicts for China. In Hong Kong, stock prices fell more than 6 percent on Monday, hitting a 13-year low as traders dumped huge numbers of shares to limit their exposure to what Xi might do next.
In China, stock markets are down about 3 percent even though the Chinese government is putting heavy pressure on institutional investors not to sell during politically sensitive moments. China’s currency, the renminbi, fell to a 14-year low against the dollar as well-to-do businesses and families continued to send money out of the country in search of safety and higher interest rates.
The heavy selling in China was particularly striking considering that the Chinese government reported stronger-than-expected data on Monday. It showed that the country’s economy grew 3.9% in the three months ending in September, compared to the same period a year earlier.
Mr. Xi has put a premium on politics and security, even at the cost of slowing economic growth and employment. In a speech at the opening of the Party Congress on October 16, Mr. Xi mentioned security six times more than he mentioned the economy. Last week, with the conference in place, the government unexpectedly delayed the usual routine release of quarterly economic data, without explanation.
Then over the weekend, as part of a two-decade reshuffle, Mr. Shi moved several of his loyalists to the upper echelons of the party. Old-fashioned economic policy makers such as Premier Li Keqiang, whose doctoral thesis won the first Chinese prize in economics in 1994, and Wang Yang, the architect of the free-market economic boom in southeast China, have been pushed back.
“The new management doesn’t look particularly business-friendly – there is every indication that party loyalty trumps everything else,” said Richard Harris, chief executive of Port Shelter Investment Management, a Hong Kong investment firm.
Under Mr. Xi, regulators have imposed restrictions on the tech sector, which has contributed to widespread layoffs among young employees. Dozens of the country’s private property developers defaulted on debt after Beijing thwarted property speculation. emperors fled the country. Lockdowns in cities and regions across the country to stem the Covid-19 outbreak have taken a heavy toll on economic growth.
Some observers and investors had hoped that Beijing would use the party congress to emphatically reassure private companies and entrepreneurs that they were still welcome. Instead, the prevailing rhetoric emanating from the secret meeting indicated further government regulation.
The slump in financial markets focused in particular on shares of Chinese internet companies, which have been a key target of Mr. Xi’s expanded campaign to bolster the party’s control of the economy.
“It is clear that prior to the party convention there was a lot of wishful thinking in large sections of the financial community that there would be some sort of clear signal of commitment to traditional liberal economic reform, and that has now been revealed as an illusion. said Arthur Cropper, co-founder and head of research at Gavekal, a China-focused research firm.
Few people expected, he added, that Mr. Xi would transfer so many of his supporters to the Politburo, especially the Politburo Standing Committee, the pinnacle of power in China.
“I think there was a fair amount of money for the idea that there would be a more balanced political bureau and a permanent committee made up of people who are not just direct aides to Xi,” said Mr. Kroeber.
Of particular concern is Mr. Xi’s signature “zero Covid” policy, which has wiped out many outbreaks but imposed major disruptions to daily life and the functioning of the economy.
Although the main economic growth figure released on Monday showed China is on the path to recovery, it is still short of Beijing’s target of 5.5 percent for this year. The details also illustrate the continuing impact of the shutdowns. Consumer spending, which recovered over the summer from a lockdown in Shanghai last spring, slowed sharply in September, as a jump in Covid cases prompted authorities to confine people to their homes.
The closures have particularly hit small shops and restaurants, which are a mainstay of urban employment. In Beijing, Wang Shixiong has run a shop for more than 20 years selling incense and Buddhist statues right across the street from Beijing’s Lama Temple, a popular tourist destination. But his recent sales have been half of what they were before the pandemic.
During the last Golden Week holiday in early October – usually a high point for tourism – his shop was quiet. He said neighborhood officials stopped by every day to check that he had disinfected the building. Security was subsequently beefed up throughout Beijing for the party congress.
“And then you add the epidemic, and there are far fewer people,” Mr. Wang said. “If there had been no pandemic, there would have been many more people at our doors.”
China’s move to release key economic data on Monday was as surprising as its delay last week. Without explanation, the National Bureau of Statistics put these numbers together without holding a regular quarterly press conference to discuss the country’s economic performance.
Better-than-expected data indicated that the government’s motive in delaying the release was to avoid having any news last week that might distract from party conference, rather than worrying that the data will look bad. However, economists said the move weakened international confidence in the reliability of China’s economic data.
“Dark clouds of political uncertainty will undermine official Chinese statistics for years to come,” said Stephen S. Roach, former president of Morgan Stanley Asia, who is now chief economist at Yale University’s Jackson School of Global Affairs. He described economic growth information released on Monday as “an unreliable report from a discredited statistical agency”.
In the long term, one question is how far Mr. Xi will advance his vision of “shared prosperity,” a campaign of vaguely defined and egalitarian wealth redistribution that has unnerved investors and could be a signal of higher taxes to come.
During the conference, Mr. Shi spoke about making sure that income accrues to those who work to earn it – an implicit rebuke to those who make a living through trade or investing. “The return to Marxism is deeper than many people thought,” said Jean-Pierre Cabestan, professor emeritus at Hong Kong Baptist University.
Keith Bradsher reported from Beijing and Alexandra Stephenson Reported from Hong Kong. Vivian Wang Contributed to reporting from Beijing and Chang Chi Contributed to reporting from Seoul. me you Contribute to research.
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