China's Consolidation of Power: One-Man Rule

Throughout the summer and leading up to the National Party Congress, there was growing speculation on how much power President Xi Jinping would lose. On the eve of the once in five-year event, China’s property sector was struggling, Xi’s signature Zero Covid policy was wreaking havoc on the economy, and his embrace of President Putin made China more isolated internationally than it had been in decades. Everyone was keenly awaiting the line-up of the Politburo Standing Committee, the seven-man board that controls China. The result: Xi loyalists/ideologs 7, pragmatists 0. Instead of losing power, Xi comes out of the Party Congress as one of the most powerful Chinese leaders in modern history. And as he has appointed no clear successor, he will likely retain power for life. Current examples of leaders for life do not set a good precedent: Erdogan in Turkey, Kim Jong-un in North Korea, and Putin in Russia. Investors voted with their feet, sending the Hang Seng index down over 6% on Monday. Xi clearly does not care about trivial capitalist things such as equity markets; since he took power in September 2012, the Hang Seng index is -27% and MSCI China is -13% while MSCI India is +88% and the S&P500 is +215%. One of our biggest concerns has been global geopolitics. The results of the Party Congress have ratcheted up this risk. When there is only one person making decisions, the chances of a misstep are amplified.