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Boding ill for China: new economic regime, rising geopolitical tensions

Chinese equities now warrant a significantly higher risk premium, and it is unwise to invest in the hope that things would improve. There are other more attractive options.

As the curtains fell on the 20th National Congress of the Chinese Communist Party, President Xi Jinping's mandate was extended for an unprecedented third term. While this came as no surprise to investors, his picks for the party's powerful seven-member Politburo Standing Committee were largely unexpected.

The top echelon of the party has been stacked with Xi's allies, making him the most powerful leader since Mao Zedong. While we have been bullish on China over the past few years, the structural shifts set in motion by Xi's consolidation of power at the top have led us to become more defensive on Chinese equities.

Previously, even as we felt China was unlikely to budge from its zero-Covid policy,...

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