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The exodus of officials with some commitment to market-driven reforms and experience in the key economic agencies from the Politburo’s most senior ranks,and their replacement with men who have little economic management credentials and are unlikely to provide any alternate viewpoints or dissenting voices to Xi’s convictions,may also have been a factor in the sell-off.

At face value,the economic data should have been greeted more positively,although the decision to delay its release while the National Congress was underway has bred some suspicion and cynicism about the quality of the numbers - something that those who monitor China’s economic performance have always been suspicious and cynical of.

The official line is that the release of the data was deferred to avoid distractions while the Congress was meeting. Cynics might say it was to avoid detailed dissection of data whose detail told a less positive story than the headline number.

Even if the numbers can be believed,they don’t flatter China’s economic managers or Xi,whose 10 years in the top job so far have seen a consistent tapering of China’s once-vaunted economic growth rate.

GDP growth in the September quarter came in at 3.9 per cent,a sharp lift from the 0.4 per cent rate experienced in the second quarter,when severe COVID-related lockdowns in Shanghai ravaged the economy,and slightly better than forecast. Since that dismal quarter,Xi has slightly relaxed the harsh approach to lockdowns,which may have helped the September quarter numbers.

The latest data,however,still puts China on track for weak annual GDP growth of around 3 per cent,or roughly in line with the International Monetary Fund’s recently-downgraded forecast of 3.2 per cent growth and on track for the weakest economic performance in 40 years,if you exclude the worst impact of the pandemic in 2020.

Moreover,the restrained growth was driven by a 6.3 per cent increase in industrial output,which is the sector most affected by the stimulus measures Beijing injected into the economy after it effectively flat-lined in the June quarter. Fixed asset investment,which probably best reflects the effects of that stimulus,rose 5.9 per cent.

Retail sales were soft,edging up 2.5 per cent year-on-year but with growth slowing in the nine months to September from the 5.3 per cent rate achieved in August.

Chinese consumers are in defensive mode and understandably so,given the uncertainty and losses generated by the country’s COVID policies and property market woes and the way they are weighing on employment markets. The urban unemployment rate rose from August’s 5.3 per cent to 5.5 per cent and youth unemployment (those aged between 16 and 24) remains very high at 17.9 per cent.

Exports were up 5.7 per cent year-on-year but,again,that was less than the 7.1 per cent rate posted in August.

While China has benefitted from fewer COVID-related disruptions to its ports in the past couple of months,the slowdown in the global economy is hitting exports even as the weakness of consumption in the domestic economy has helped limit growth in imports to 0.3 per cent.

A cyclist passes buildings in Pudong’s Lujiazui Financial District in Shanghai. Chinese President Xi Jinping signalled no change in direction for main risk factors dragging down China’s economy,including the country’s strict COVID rules.Credit:Qilai Shen

So,even if the numbers can be believed (most external analysts believe that China has consistently over-stated its growth),they don’t flatter China’s economic managers or Xi,whose 10 years in the top job so far have seen a consistent tapering of China’s once-vaunted economic growth rate.

It is improbable that China is suddenly going to see a surge in growth that would take it back to the solid rates it generated pre-pandemic,even if the new leadership resorts to more stimulus or further softens its approach to COVID outbreaks.

The composition of the Politburo and Xi’s own speech to the Congress confirms the shift in the emphasis in China’s economic strategy from one in which financial markets and the private sector played a vital role to Xi’s “common prosperity” model - which is,in effect,a highly statist approach to management of the economy and society in which much less productive but centrally-directed state-owned enterprises displace more entrepreneurial private sector entities.

With a shrinking population,China will need to increase the productivity of its workforce and use of capital to maintain a decent growth rate. The shift towards greater state control and the larger role for state-owned enterprises will almost inevitably work against that objective.

The results of the heavy-handed approach from Beijing’s shift in policies and its interventions can be seen in the collapse of China’s key property sector,which continues. Property sales are down 22 per cent so far this year,new construction starts have fallen 38 per cent and property investment is down by 8 per cent.

The heavy-handed policies towards the property and technology sectors and the digital services economy more broadly have wiped trillions of dollars from the value of China’s most entrepreneurial companies and individuals.

Also increasingly weighing on growth will be the trade and geopolitical frictions with the US and,more recently,Europe.

The Biden administration’s recent ban on the supply of semiconductors to China by US companies or anyone else where’s been some US input into their production was aimed at throttling China’s long-term growth and ambitions,but there are a host of other trade sanctions in place or in the making that will continue to impact China’s economy in the near term.

In all the circumstances,therefore,it isn’t surprising that investors looked at the nature of China’s new leadership and the state of its economy and,disliking what they saw,voted with their feet.

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