China’s GDP: Q3 2022 Data Stronger Than Expected After Xi Jinping Wins Third Term

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CNN Business

China released stronger-than-expected GDP and other economic data on Monday, just a day after Xi Jinping won a historic third term in office following the conclusion of a large political rally.

But foreign investors were still spooked and dumped Chinese stocks in overseas markets, fearing that Xi’s tightening grip on power could lead to an escalation of Beijing’s existing policies and further cripple the economy.

China’s GDP rose 3.9% in the third quarter from a year ago, beating market expectations, the National Bureau of Statistics said Monday. Previously, a Reuters poll of economists had forecast growth of 3.4%.

That marked a recovery from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the country’s financial center and a global trade hub, was shut down for two months in April and May.

But the recently released growth rate of 3.9% was still below the official annual target the government set earlier this year.

“The outlook remains bleak,” Julian Evans-Pritchard, senior China economist for Capital Economics, said in a research report on Monday.

“There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any significant easing until 2024,” he added.

Coupled with a further weakening of the global economy and a continuing slump in China’s real estate, all headwinds will continue to pressure the Chinese economy, he said.

Evans-Pritchard expected China’s official GDP to grow just 2.5% this year and 3.5% in 2023.

Monday’s GDP data release came after a week-long delay.

The economic data was originally due out on October 18, but was postponed without any explanation.

The ruling Communist Party held its twice-in-a-decade Party Congress from Oct. 16-22, during which Xi not only managed to secure an unprecedented third term as party leader, but also fulfilled the new management team with his faithful followers – a sign that Xi now has an iron grip on power.

But a number of senior economic leaders well known for their support for market reforms and the opening up of the economy were absent from the new leadership, raising concerns about China’s prospects already fragile economy. Missing names include Premier Li Keqiang, Vice Premier Liu He and Central Bank Governor Yi Gang.

Following the revelation of the new leadership and GDP data, Hong Kong’s Hang Seng

The index plunged on Monday and headed for its biggest losses since the 2008 global financial crisis. The index is a key gauge of foreign investor sentiment on China.

The Chinese currency also fell, weakening sharply against the dollar.

“It appears the management reshuffle has caused foreign investors to offload their Chinese investments, prompting strong sales of Hong Kong-listed Chinese stocks,” said Ken Cheung, chief Asian forex strategist at the bank. Mizuho.

Some analysts said the new leadership did not bode well for the economic outlook or US-China relations.

“With the Politburo Standing Committee made up of close allies of President Xi, market participants are reading the implications as President Xi’s consolidation of power and continued policy,” Cheung said.

“It seems that foreign investors were worried about the escalation of existing policies such as zero-Covid and ‘common prosperity’, as well as China-US tension,” he added.

Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.

“The departure of officials and reformers seen as supportive of reviving the Politburo Standing Committee and their replacement by Xi allies suggests that ‘common prosperity’ will be the main push for officials,” Kotecha said.

“Common Prosperity” is a campaign Xi launched last August to redistribute wealth and narrow the gap between rich and poor, as Xi described it. Under the campaign banner, Beijing has launched a sweeping crackdown on private enterprise in the country, which has undermined nearly every private sector industry.

Hong Kong’s benchmark Hang Seng index opened sharply lower on Monday and fell 6.1% in the early afternoon, poised for its biggest daily decline since November 2008.

The Hang Seng Tech Index, which tracks the 30 largest tech companies listed in Hong Kong, plunged more than 8%. Ali Baba

and Tencent

fell by 10.5% and 9% respectively.

The Chinese yuan weakened sharply against the greenback. The offshore yuan is currently trading at 7.269 to the dollar, down 0.5% from the previous day. The onshore yuan also fell 0.3% to 7.252 to the dollar.

“The [market] The reaction to our advice is consistent with the diminished prospects for meaningful stimulus or shifts towards zero-Covid policy. Overall, the prospects for a reacceleration of growth are limited,” Kotecha said.

Meanwhile, the Shanghai Composite Index, which trades in the tightly controlled domestic market in China, fell 1.3%. The tech-heavy Shenzhen Components Index lost 1.9%.

Elsewhere in Asia, Japanese and Korean markets pared initial gains. The Nikkei

rose 0.5% and the Kospi added 0.8%.

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