Will China Prove the Doomsayers Wrong?
Investors seem convinced that Chinese President Xi Jinping’s new leadership lacks the knowhow and independence to mount an effective response to the profound economic challenges the country faces. Whether they are proved right or wrong depends – like virtually everything else in China nowadays – on the man at the top.
ATHENS – The new leadership team selected by Chinese President Xi Jinping at the 20th National Congress of the Communist Party of China failed to impress financial markets at home and abroad. In the week following the announcement of Xi’s new team, Hong Kong’s stock market declined by 8.3%, and the Shanghai Composite Index, China’s largest stock exchange, dropped 4%, despite the Chinese government’s intervention to prop up prices. US-listed Chinese stocks plunged by 15%.
Investors have good reason to worry. Though financial markets had already priced in Xi’s third term, investors had hoped that he would appoint a team of more moderate, experienced officials capable of putting pragmatism above politics. Instead, Xi packed the Politburo and its Standing Committee with loyal allies and protégés.
China’s next premier will be Li Qiang, who was Xi’s chief of staff (2004-07), before later serving as governor of Zhejiang province (2013-16), and CPC Secretary of Shanghai (2017-22). Li is widely credited with convincing Tesla to build its largest overseas factory in Shanghai – an achievement that has bolstered his business-friendly reputation. But, unlike every other premier since 1988, Li has no national-level administrative experience.
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