Foreign investors dump Chinese stocks as Xi Jinping tightens power grip

International investors are fleeing China as President Xi Jinping tightens his power grip on the country. After securing a precedent-breaking third term as head of China’s communist party, Xi shored up his dominance by stacking the Politburo Standing Committee with loyalists.

The Politburo is China’s top governing body and analysts say the sea of allies means there won’t be any checks and balances on Xi’s agenda this next term. Xi previously abolished the presidential two-term limit in 2018, opening the door for him to serve in the role indefinitely.

Eurasia Group Senior China Analyst Neil Thomas called the political appointments “a clean sweep for Xi allies and a consolidation of power unseen since the Mao era,” referring to the reign of Mao Zedong, who ruled China’s communist party for decades until his death in 1976.

Stocks Monday marked their worst day in Hong Kong since the global financial crisis. The Hang Seng China Enterprises index dove 7.3% in one day, the worst ever showing after a Communist Party congress.

Foreign investors pulled $2.5 billion out of China’s domestic stock market, the tech sector hit harder than the market as a whole. Alibaba, Tencent, Baidu and other internet and tech stocks were all down more than 11%.

Alibaba Group Holding Ltd:  -11.28%
Tencent Holdings Ltd:  -11.08%
Baidu Inc:  -12.09%
Meituan:  -14.62%
JD.com Inc:  -13.35%

The selloff was sparked by investors’ worries that Xi’s dominance will lead to more policies that are even less friendly to markets and private enterprise.

“Tech stocks have never been the best friend of Xi and it’s clear that the market thinks that purge will continue,” said Justin Tang, head of Asian research at United First Partners.

The poor stock performance Monday occurred despite positive data from a delayed release of China’s third quarter gross domestic product, showing the economy grew by 3.9% from the same quarter a year ago, beating previously downgraded expectations. China had stalled the official release of the numbers without explanation in mid-October.