December 6, 2022

China’s GDP data was unexpectedly released after a delay

As China’s top leader, Xi Jinping, has moved to extend his rule, he has pushed out rivals perceived as pro-business. He praised Marxism over markets. He prioritized security over economy.

Now, with his grip on China tighter than ever, Mr. Xi begins a spectacular third term this week to expand the Communist Party’s influence over the economy.

At the head of the party Mr. Xi’s hopes could shift the world’s second-largest economy back toward a state-led model. A new era in China was ushered in by Mr. Xi’s consolidation of power indicates that national security and ideology will be a higher priority than maintaining strong growth. This could be bad news for an economy already dragged down by official policies such as lockdowns and a strict “zero Covid” strategy of mass testing.

Financial markets are already Mr. Xi’s extended rule — and his agenda — are showing their uneasiness about what that portends for China. In Hong Kong, stock prices fell more than 6 percent on Monday to a 13-year low, as traders mr. They unloaded a large number of stocks to prevent what Xi might do next.

In mainland China, stock markets fell nearly 3 percent, even as the Chinese government stepped up pressure on institutional investors not to sell at politically sensitive moments. And China’s currency, the renminbi, fell to a 14-year low against the dollar as companies and affluent households continued to send money out of the country in search of safety and higher interest rates.

Higher sales in China were particularly striking as the Chinese government reported stronger-than-expected data on Monday. It showed that the country’s economy grew by 3.9 percent in the three months ended September.

Although reducing economic growth and employment, Mr. At the opening ceremony of the party conference on October 16, Mr. Xi mentioned defense six times as much as he mentioned the economy. Last week, while the conference was underway, the government unexpectedly delayed the regular release of quarterly economic data without explanation.

Later in the weekend, as part of a twice-a-decade leadership reshuffle, Mr. Xi moved many of his loyalists into top party positions. He ousted longtime economic policymakers such as Premier Li Keqiang, whose doctoral dissertation won China’s top prize in economics in 1994, and Wang Yang, the architect of free-market economic development in southeast China.

“The new administration is not particularly business friendly – there is every indication that party loyalty trumps everything else,” said Richard Harris, chief executive of Hong Kong investment firm Port Shelter Investment Management.

Mr. Under Xi, regulators have clamped down on the tech sector, contributing to widespread layoffs among young workers. Dozens of the country’s private property developers defaulted on loans after Beijing cracked down on real estate speculation. principals They are fleeing the country. Lockdowns in cities and regions across the country to prevent the spread of Covid-19 have taken a toll on economic growth.

Some observers and investors hoped Beijing would use the party congress to make firm promises that private businesses and entrepreneurs would still be welcome. Instead, the dominant rhetoric emerging from the conference pointed to further state regulation.

A nosedive in financial markets has focused particularly around shares of Chinese internet companies, which have seen Mr Trump strengthen the party’s control over the economy. were the main target of Xi’s extensive campaign.

It is clear that there was much wishful thinking in much of the financial community before the party congress that there would be some sort of clear signal of commitment to traditional liberal economic reform, which has now been exposed as an illusion. ” said Arthur Kroeber, a founding partner and head of research at China-focused research firm Kavegal.

Mr. He added that some expected Xi to move many of his loyalists.

“I think there was fair money in the idea of ​​having a more balanced politburo and a standing committee that included people not just direct allies of Xi,” Mr. Kroeber said.

Of particular concern, Mr. Xi’s signature “Zero Covid” policy, which has sealed numerous outbreaks, has caused major disruptions to daily life and the functioning of the economy.

Although the headline figure for economic growth released on Monday showed China is on the road to recovery, it still fell short of Beijing’s target of 5.5 percent for this year. The details also illustrate the continuing impact of the lockdowns. Consumer spending, which rebounded in the summer since Shanghai’s lockdown last spring, fell sharply in September as a surge in Covid cases prompted authorities to confine people to their homes.

Lockdowns have particularly affected small shops and restaurants, a major source of urban employment. In Beijing, across the street from the popular tourist attraction Beijing Lama Temple, Wang Shixiong has run a shop selling incense and Buddhist statues for more than 20 years. But his sales have recently been about half of what they were before the pandemic.

During the recent Golden Week holiday in early October — usually a high point for tourism — his shop was quiet. Neighborhood officials stop by every day to check that he has disinfected the premises, he said. Security was beefed up across Beijing on the occasion of the party conference.

“Then you add the epidemic, and there are fewer people,” Mr. Wang said. “If there wasn’t an epidemic, there would be a lot of people on our doorstep.”

China’s move to release key economic data on Monday was as surprising as its delay last week. Without explanation, the National Bureau of Statistics released the figures without holding its regular quarterly news conference to discuss the country’s economic performance.

The better-than-expected data suggested the government’s intention in delaying output was to avoid any distracting news last week. Party Congress, rather than worrying about the data being bad. However, economists said the move has compromised international confidence in the reliability of China’s economic data.

“Dark clouds of political suspicion will continue to undermine official Chinese statistics for years to come,” Stephen S. Roche, former head of Morgan Stanley Asia, is now a senior economist at Yale’s Jackson School of Global Affairs. He described the economic growth data released on Monday as “not a reliable report from a discredited statistics agency”.

In the long run, one question is whether Mr. How far Xi will push is a vaguely defined, egalitarian campaign to redistribute wealth that will unnerve investors and signal higher taxes to come.

A veiled condemnation of those who earn their living through trade or investment – Mr. Shi spoke. “The return to Marxism is deeper than many people think,” said Jean-Pierre Capeston, professor emeritus at Hong Kong Baptist University.

Keith Bradsher Beijing and Alexandra Stevenson Reported from Hong Kong. Vivian Wang Contributed report from Beijing and Chang Che Contributed reporting from Seoul. Li Yu Research contributed.