Investor fears about Xi’s new leadership team ‘may be misguided’
Li Qiang, likely to become the next premier, is pictured here speaking at a major annual financial conference in Shanghai in 2020.
Bloomberg | Bloomberg | Getty Images
BEIJING — Chinese stocks’ plunge on Monday over fears about China’s new leadership team “may be misguided,” consulting firm Teneo said.
Chinese stocks in Hong Kong and New York, especially internet tech giants such as Alibaba, dropped on the first trading day after Chinese President Xi Jinping cemented his firm grip on power with a new core leadership team filled with his loyalists.
Over the last several years, Xi has shown a preference for greater state involvement in the economy.
“Close relationships with Xi notwithstanding, Li Qiang, Li Xi, and Cai Qi all enter the [Politburo standing committee] after heading up rich provinces where economic growth is still the top priority,” Teneo Managing Director Gabriel Wildau and a team said in a note.
Xi’s leadership team
The Politburo standing committee is the highest circle of power in China.
Li Xi has led the export-heavy province of Guangdong as party secretary, while Cai Qi held the role for the capital city of Beijing.
Mr Li [Qiang] has been widely regarded as a capable pro-market and pro-growth politician.
chief China economist, Nomura
Li Qiang, likely to become the next premier, oversaw stringent Covid lockdowns in Shanghai this year in his role as party secretary of the city.
However, analysts such as Nomura’s Chief China Economist Ting Lu pointed out that Li Qiang “has extensive experience in managing some of China’s richest and biggest provincial economies” — Zhejiang, Jiangsu and Shanghai.
“Mr Li has been widely regarded as a capable pro-market and pro-growth politician,” the Nomura report said.
“Mr Li suffered some setbacks during the Omicron wave in spring this year, when the entire city of Shanghai was put under a restrictive full lockdown. However, during most of 2020 and 2021, Shanghai under Mr Li’s governorship was perceived as a role model for achieving a reasonable balance between Covid containment and economic growth.”
Analysts also pointed out the promotions of He Lifeng, head of the National Development and Reform Commission, and securities regulator head Yi Huiman.
He Lifeng will likely “succeed the retiring Liu He as vice premier and director of the party’s Central Financial and Economic Affairs Commission,” Teneo analysts said.
In our view, the completion of the [party congress] will enable the top leadership to move on to the next policy agenda soon — relaxing the Covid curbs.
“Though He lacks Liu’s technocratic expertise, He’s record also suggests a strong focus on economic growth,” the report said. “In an article last year, He wrote that economic development was the ‘number one task’ and the foundation and key to solving all our country’s problems.'”
Xi’s speech at the opening of the Chinese Communist Party’s 20th National Congress this month emphasized that China will focus on “high-quality development” and “modernization” in the coming years.
Common prosperity — moderate wealth for all, rather than just a few — is a requirement for that modernization, Xi said.
Analysts have said China’s renewed pursuit of common prosperity contributed to Beijing’s recent crackdown on internet tech giants.
Chinese officials have signaled that the crackdown is nearing an end. In July, a Politburo meeting readout said officials called for the continued “healthy” development of the “platform economy” and “completing” the businesses’ adjustments.
China’s Covid policy
The party congress that ended over the weekend did not signal whether China’s stringent Covid controls would be changed soon. The restrictions on business activity have weighed on economic growth.
However, Bank of America China and Asia Economist Helen Qiao and a team said in a note Monday that Covid policy changes could happen sooner than the market expects.
“In our view, the completion of the [party congress] will enable the top leadership to move on to the next policy agenda soon — relaxing the Covid curbs,” the report said.
The analysts said some might worry about the new group of leaders’ lack of checks and balances, and the risk of policy mistakes that shock the economy.
But they added that the group’s solidarity “may lead to more effective policy execution” for the country overall.
— CNBC’s Michael Bloom contributed to this report.