Chinese President Xi Jinping may not be the best mate for the Australian stock market.
On Saturday, the eve of the 92nd anniversary of the Communist Party of China’s founding, Xi said officials should not be judged solely on their record of boosting gross domestic product. State news agency Xinhua reported Xi as saying the Communist Party should place more importance on improving people’s lives. An improvement in people’s livelihoods, social development and pollution are more important when evaluating the performance of communist party cadres, says China’s president.
Xi’s remarks further confirm he and Premier Li Keqiang will not push the world’s second-largest economy to the average growth rate of 10.5 per cent a year over the last 10 years. In fact economic growth, according to some analysis of the Chinese economy, will not reach the official target of 7.5 per cent this year. Xi and Li seem determined to clamp down on the easy money that has made some very wealthy through what many in China have grumbled at – speculative activities at the cost of widening social inequality and a degraded environment.
Chinese citizens are now more vocal in their criticism of officials, corrupt practices and pollution. Xi and Li are conscious they will be judged not just on numbers. Like politicians in other parts of the world, the two most senior Chinese leaders will be assessed by their increasingly articulate people on the impact, positive or negative, they are having on society.
That means if the economy is to slow in order to try and tackle rising prices that make life somewhat unaffordable to ordinary people, so be it. People’s Bank of China Governor Zhou Xiaochuan said on Saturday that the slowing of economic growth in China is “reasonable”. Far from it being a problem, Zhou says he is confident in the country’s economic prospects.
That is all very well, but China will remain Australia’s biggest export market and the biggest determinant on how the local economy, and by default the stock market, will perform. Without China growing at rates seen over the past decade, Australia’s economy is likely to well and truly suffer, especially the mining sector and its share prices. In the new financial year, Australia’s stock market faces a headwind that many have yet to account for in their forecasts.