Chinese stocks listed in the US were slammed on Monday morning after the Chinese Communist Party concluded its national congress over the weekend.
What happened? Chinese guide Xi Jinping consolidated his control of the Chinese Communist Party by appointing loyalists to the party’s most powerful positions and shunning the party congress Retaining his presidency for a third term.
Given Xi’s aggressive crackdown on major Chinese tech companies in recent years, investors see his recent rise to power as bad news for Chinese innovation and economic growth.
Why it matters: Foreign investors reportedly pulled out $2.5 billion from the Chinese domestic market on Stock Connect on Monday, the largest single-day outflow since the platform launched in 2014.
Chinese stocks listed in the US also suffered a major slump. Here is how some of them acted on Monday morning:
- Alibaba Group Holding Ltd – ADR BABA fell by 14.3%.
- Pinduoduo Inc – ADR PDD fell by 28.5%.
- JD.Com Inc JD fell by 15.3%.
- Baidu Inc BIDU fell by 15%.
- Nio Inc – ADR NEVER fell by 17.8%.
Bank of America economist Helen Qiao said the new leadership group in China and the lack of a successor for Xi means China’s economic destiny rests solely in the hands of Xi and a handful of his most staunch supporters.
“Some investors may worry about the lack of checks and balances, and the risk of potential policy failures are evolving into major shocks to the economy. On the other hand, this constellation also implies solidarity at the highest level and can lead to more effective policy implementation and little political resistance to bolder reforms or changes to existing policy positions,” Qiao said.
In the short term, one of the biggest question marks for Chinese investors will be the future of Xi’s Covid-Zero policy.
While most other countries in the world fully reopened their economies in early 2021, China is still enacting periodic lockdowns of major metropolitan areas, including full or partial quarantines of more than 300 million people, as…
