China’s stocks fell on Monday to their lowest levels since 2008, amid concerns over the possibility that President Xi Jinping’s move to secure a third term would see the return of his push to tighten control over the country’s biggest companies and their founders.
Stocks in Hong Kong markets took a significant hit, with the Hang Seng index losing 6.4%, its worst single-day rout since the 2008 financial crisis, and the Hang Seng Tech index futures dropping 9.3% to an all-time low.
China’s benchmark CSI 300 index also slipped as much as 2.9%.
Investors Wary of Xi’s Consolidation of Power
Markets retreated on Monday after Xi cemented his third term as China’s leader and introduced a new leadership team consisting of loyalists.
Xi revealed the new lineup of the country’s main governing body, the Politburo Standing Committee, with six committee members seen as loyalists having close ties to Xi.
The leadership reshuffle underscored Xi’s strong hold over the ruling party, raising the prospect of continued implementation of the country’s strict policies on controlling COVID-19 and state-driven businesses.
Chinese tech giants, including Alibaba Group Holding Ltd., Tencent Holdings Ltd., and Meituan, logged losses of over 11% and almost 15% as investors expressed uncertainty that Xi would ease regulatory pressure on private firms.
Singapore-based head of Asian research Justin Tang said the concern is that with many Xi supporters elected, Xi now has the authority to pass policies that may not be market-friendly.
While adding Xi’s allies may accelerate key plans, the inclusion of COVID-zero supporters to the committee lowers the odds of easing COVID-19 measures earlier than expected.
During his speech at the National People’s Congress, Xi also pledged to ‘regulate the wealth accumulation mechanism,’ although he offered few details on the matter.
The oath could signify wealth redistribution from the rich to everyone else. However, some economists believed the pledge could mean higher taxes for the wealthy, which may also include China’s richest entrepreneurs.
