Li Qiang, who is likely to become the next prime minister, is pictured here at a major annual financial conference in Shanghai in 2020.
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BEIJING (Reuters) – Chinese stocks’ plunge on Monday on fears over China’s new management team “could be wrong”, consultancy Teneo said.
Chinese stocks in Hong Kong and New York, especially internet technology giants such as Ali Baba, fell on the first trading day after the Chinese president Xi Jinping cemented his firm grip on power with a new core leadership team filled with his loyalists.
In recent years, Xi has shown a preference for greater state involvement in the economy.
“Despite close relations with Xi, Li Qiang, Li Xi and Cai Qi all enter the [Politburo standing committee] after leading wealthy provinces where economic growth is still the top priority,” Teneo chief executive Gabriel Wildau and a team said in a note.
The Politburo Standing Committee is the highest circle of power in China.
Li Xi led export-heavy Guangdong Province as party secretary, while Cai Qi served in the capital, Beijing.
Li Qiang, likely to become the next prime minister, has overseen Shanghai’s strict Covid lockdowns this year in his role as the city’s party secretary.
However, analysts such as Nomura’s chief economist for China, Ting Lu, have pointed out that Li Qiang “has extensive experience in managing some of China’s richest and most important provincial economies” – Zhejiang , Jiangsu and Shanghai.
“Mr. Li was widely regarded as a competent pro-market and pro-growth politician,” the Nomura report said.
“Mr. Li suffered some setbacks during the Omicron wave in the spring of this year, when the entire city of Shanghai was put under a restrictive full lockdown. However, for most of 2020 and 2021, Shanghai under the government of Mr Li was seen as a role model for striking a reasonable balance between Covid containment and economic growth.”
Analysts also pointed to the promotions of He Lifeng, head of the National Development and Reform Commission, and securities regulator head Yi Huiman.
He Lifeng “will likely succeed Liu He who is retiring as deputy premier and director of the party’s Central Financial and Economic Affairs Commission,” Teneo analysts said.
“Although he lacks the technocratic expertise of Liu, He’s background also suggests a strong focus on economic growth,” the report said. “In an article last year, he wrote that economic development was ‘task number one’ and the foundation and the key to solving all the problems of our country.'”
Xi’s speech at the opening of the 20th National Congress of the Communist Party of China this month stressed that China will focus on “high-quality development” and “modernization” in the coming years.
Common prosperity — moderate wealth for all, rather than the few — is a requirement of this modernization, Xi said.
Analysts said China’s renewed pursuit of common prosperity has contributed to Beijing’s recent crackdown on internet tech giants.
Chinese officials have signaled that the crackdown is coming to an end. In July, a report from a Politburo meeting said officials called for the continued “healthy” development of the “platform economy” and “complete” the adjustments of the companies.
The party congress that ended this weekend did not say whether China’s strict Covid controls would soon be changed. Restrictions on business activity have weighed on economic growth.
However, Bank of America China and Asia economist Helen Qiao and a team said in a note on Monday that the Covid policy shifts could come sooner than market expectations.
“In our opinion, the completion of the [party congress] will allow the most senior leaders to move on to the next policy agenda soon – easing the Covid brakes,” the report said.
Analysts said some might worry about the new group of leaders’ lack of checks and balances and the risk of policy mistakes that shock the economy.
But they added that group solidarity “could lead to more effective policy execution” for the whole country.
– CNBC’s Michael Bloom contributed to this report.