Hong Kong CNN Business — China released stronger-than-expected GDP and other economic data on Monday, a day after Chinese President Xi Jinping confirmed his historic third term in office after a major political rally. However, foreign investors were still frightened and sold Chinese stocks to overseas markets, fearing that Xi Jinping’s strengthening of power would expand existing policies in Beijing and further worsen the economy. China’s National Bureau of Statistics reported on Monday that China’s third-quarter GDP grew 3.9% from a year earlier, beating market expectations. Previously, a Reuters poll of The Economists had predicted a 3.4% growth rate. This is a rebound from a 0.4% gain in the second quarter, when the Chinese economy was hit by a widespread Covid lockdown. Shanghai, China’s financial center and major global trade hub, was closed for two months in April and May. However, the newly announced 3.9% growth rate is still below the official annual target set by the government earlier this year. “The outlook remains bleak,” Julian Evans-Pritchard, chief China economist at Capital Economics, said in a research report Monday. “It is unlikely that China will withdraw its zero-coronavirus policy in the near future, and we do not expect any meaningful easing before 2024,” he added. He said all headwinds will continue to weigh on the Chinese economy, along with further weakening of the global economy and the continued slump in Chinese real estate. Evans-Pritchard expects China’s official GDP to grow by 2.5% this year and 3.5% in 2023. Monday’s GDP data release came after a week delay. The economic data was originally scheduled to be released on October 18, but was postponed without any explanation. The ruling Communist Party not only secured a three-term high-level in the history of the ruling Communist Party, but also filled his new leadership with his own abilities at the party congress held twice a decade, from October 16 to October 22. Unwavering Loyalty — A sign that Xi is now in great power. However, many key economic officials known for supporting market reforms and opening up the economy have pulled out of the new leadership, raising concerns about the already fragile outlook for China’s economy. The missing names include Premier Li Keqiang, Deputy Prime Minister Liu He and Central Bank Governor Lee Kang. Hong Kong’s Hang Seng (HSI) index plunged Monday after new leadership and GDP data were released, marking its biggest loss since the 2008 global financial crisis. This index is a key indicator of foreign investment sentiment in China. The Chinese yuan also weakened against the dollar. Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank, said: “The leadership reshuffle seems to have triggered a massive sell-off of Chinese stocks listed in Hong Kong as foreign investors are burdened with investing in China.” Some analysts said the new leadership is a bad sign for the economic outlook or for US-China relations. “Through the Politburo Standing Committee, which is made up of Xi’s close aides, market participants read the implications of President Xi’s power consolidation and policy continuation,” Chung said. He added, “Foreign investors appear to be concerned about the escalation of existing policies such as zero COVID-19 and ‘prosperity’ and escalating tensions between the US and China.” Mitul Kotecha, head of strategy for emerging markets at TD Securities, said that the new leadership supports reforms. The disappearance of officials is a bad omen for the future of China’s private sector, Kotecha said: “The departure of stimulus-supporting officials and reformers from the Politburo Standing Committee and replacing them with Xi Jinping’s allies means that ‘common prosperity’ is the bureaucracy’s “Prosperity for common prosperity” is a campaign launched by Xi Jinping in August to redistribute wealth and close the gap between the rich and the poor, as Xi Jinping explained. Under the banner of the campaign, Beijing is pushing the boundaries of almost all private sector industries. Hong Kong’s benchmark Hang Seng Index fell 6.1% in the early afternoon on Monday, marking its biggest daily decline since November 2008. The Hang Seng Tech Index, which tracks the top 30 tech companies listed on the U.S., fell more than 8%, while Alibaba (BABA) and Tencent (TCEHY) fell 10.5% and 9%, respectively, the Chinese yuan sharply against the US dollar. The offshore yuan is currently trading at $7.269 per dollar, down 0.5% from the previous day. The onshore yuan also fell 0.3% to $7.252 per dollar. [market] From our point of view, the response is consistent with a reduction in prospects of significant stimulus or a change in the zero-coronavirus policy. Overall, the chances of growth accelerating again are limited,” said Kotecha. Meanwhile, the Shanghai Composite Index, traded in China’s domestic market, fell 1.3%. The tech-focused Shenzhen Components Index fell 1.9%. In other parts of Asia, the Japanese and Korean markets saw early gains. The Nikkei (N225) rose 0.5% and the KOSPI rose 0.8%.
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