China launched stronger-than-expected GDP and different financial information on Monday, only a day after Xi Jinping clinched a historic third term in power following the conclusion of a major political gathering.
However overseas buyers have been nonetheless spooked and dumped Chinese language equities in abroad markets, involved that Xi’s tightening grip on energy will result in an escalation in Beijing’s current insurance policies and additional dent the financial system.
China’s GDP grew 3.9% within the third quarter from a yr in the past, beating market expectations, the Nationwide Bureau of Statistics introduced on Monday. Beforehand, a Reuters ballot of economists had anticipated development of three.4%.
That marked a pick-up from the 0.4% improve within the second quarter, when China’s financial system was battered by widespread Covid lockdowns. Shanghai, the nation’s monetary middle and a key international commerce hub, was shut down for 2 months in April and Might.
However the newly launched 3.9% development price was nonetheless beneath the annual official goal that the federal government set earlier this yr.
“The outlook stays gloomy,” stated Julian Evans-Pritchard, senior China economist for Capital Economics, in a analysis report on Monday.
“There isn’t a prospect of China lifting its zero-Covid coverage within the close to future, and we don’t anticipate any significant rest earlier than 2024,” he added.
Coupled with an additional weakening in international financial system and a persistent hunch in China’s actual property, all of the headwinds will proceed to stress the Chinese language financial system, he stated.
Evans-Pritchard anticipated China’s official GDP to solely develop 2.5% this yr and three.5% in 2023.
Monday’s GDP information launch got here after every week of delay.
The financial information have been initially scheduled to come back out on October 18, however had been postponed with none clarification.
The ruling Communist Celebration held its twice-in-a-decade social gathering congress from October 16 to October 22, throughout which Xi not solely managed to safe a precedent-breaking third time period because the social gathering chief, but in addition stuffed the brand new management crew with his staunch loyalists — an indication that Xi now has an iron grip on energy.
However numerous key financial officers who’re well-known for being supportive of market reforms and opening up the financial system have been lacking from the brand new management, stirring issues concerning the outlook of China’s already fragile economy. The lacking names embrace Premier Li Keqiang, Vice Premier Liu He, and central financial institution governor Yi Gang.
Following the revelation of the brand new management and GDP information, Hong Kong’s Hold Seng
(HSI) Index plunged on Monday and headed for its largest losses because the 2008 international monetary disaster. The index is a key gauge of abroad investor sentiment on China.
The Chinese language forex additionally tumbled, weakening sharply in opposition to the greenback.
“It seems that the management reshuffle spooked overseas buyers to dump their Chinese language funding, sparking heavy sell-offs in Hong Kong-listed Chinese language equities,” stated Ken Cheung, chief Asian foreign exchange strategist at Mizuho financial institution.
Some analysts stated the brand new management doesn’t bode properly for the financial outlook or US-China relations.
“With the Politburo Standing Committee composed by President Xi’s shut allies, market members learn the implications as President Xi’s energy consolidation and the coverage continuation,” Cheung stated.
“It seems that overseas buyers have been worrying about escalation of current insurance policies resembling zero-Covid and ‘Frequent Prosperity,’ in addition to the China–US pressure,” he added.
Mitul Kotecha, head of rising markets technique at TD Securities, additionally identified that the disappearance of pro-reform officers from the brand new management bodes ailing for the way forward for China’s non-public sector.
“The departure of perceived pro-stimulus officers and reformers from the Politburo Standing Committee and alternative with allies of Xi, means that ‘Frequent Prosperity’ would be the overriding push of officers,” Kotecha stated.
“Frequent Prosperity” is a marketing campaign that Xi initiated final August to redistribute wealth and slim the hole between wealthy and poor, as Xi described it. Below the banner of the marketing campaign, Beijing has launched a sweeping crackdown on the nation’s non-public enterprise, which shook virtually each private-sector trade to its core.
On Monday, Hong Kong’s benchmark Hold Seng Index opened sharply decrease and sank 6.1% in early afternoon, poised for its largest day by day decline since November 2008.
The Hold Seng Tech Index, which tracks the 30 largest know-how companies listed in Hong Kong, plunged greater than 8%. Alibaba
(BABA) and Tencent
(TCEHY) plummeted 10.5% and 9% respectively.
The Chinese language yuan weakened sharply in opposition to the dollar. The offshore yuan at the moment trades at 7.269 per greenback, down 0.5% from yesterday. The onshore yuan additionally dropped 0.3% to 7.252 per greenback.
“The [market] response in our view is per the lowered prospects of great stimulus or adjustments to zero-Covid coverage. Total, prospects of a re-acceleration of development are restricted,” Kotecha stated.
In the meantime, the Shanghai Composite Index, which trades on the tightly managed home market in China, dropped 1.3%. The tech-heavy Shenzhen Part Index misplaced 1.9%.
Elsewhere in Asia, Japan and Korean markets have pared early positive aspects. The Nikkei
(N225) rose 0.5%, and the Kospi added 0.8%.