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China's stock market dropped on Monday after Xi Jinping was confirmed as the country's leader for a third consecutive five-year term, breaking with the Communist Party's traditional two-term limit.
As foreign investors took fright at Xi's expansion of power, the benchmark Shanghai Composite Index was down 2.02 percent on Monday, at 2,977.56 points, while the Shenzhen Component Index closed 2.05 percent lower at 10,694.61 points.
The ChiNext Index was down 2.43 percent and closed at 2,336.84 points, according to China Daily.
The Hang Seng China Enterprises index in Hong Kong fell as much as 7.4 percent, the index's worst tumble since the 2008 global financial crisis.
"The new leadership indicates more concentration in top decision-making procedure," a report published on Monday by Bank of America and quoted by NIKKEI Asia said. "Some investors may worry about the lack of checks and balances, and the risk [that] potential policy mistakes evolve into major shocks to the economy."
China's yuan was also hit, with the offshore yuan weakening as much as 0.7 percent to 7.2782 per dollar on Monday morning, after already falling by about 12 percent against the dollar so far this year by late September.
The onshore yuan also dropped recently, plunging to the weakest level in 14 years only three days ago, as the 20th Party Congress was in the midst of its week-long meeting to choose China's next leader.
On Sunday, Xi confirmed his reappointment as the party's general secretary while revealing the six loyalists who would be part of the Politburo Standing Committee (PSC), the party's top political body—Li Qiang, Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang, and Li Xi.
Xi's new centralized strength, as he surrounds himself with his acolytes, gives more power to the Chinese authoritarian leader while also raising concerns in the market over the president's future policies.
But the likely continuity of Xi's current policies in the future means the Chinese leader won't be backing away from his "zero-COVID" policy, which has paralyzed businesses and entire cities across the country and has proven to have a devastating impact on China's economy as well as raising unhappiness among the population.
"The future of the COVID Zero policy remains an open-ended question. Now with power more concentrated at the top, this decision hinges even more on President Xi's views," the report by Bank of America said.
The loyalty of the members of the PSC to Xi also makes it likely that the president would be unchallenged in his decisions, suggesting that policies that could be harmful to the Chinese economy and businesses might get the go-ahead.
"We know perfectly well what his intentions are, his intention is not to focus on growth, but to focus on making the economy strong and making China not so reliant on the West for technology," Professor Steve Tsang, director of the School of Oriental and African Studies (SOAS) China Institute at SOAS University of London, told Newsweek.
"This is what he wants to do, the problem is how many people believe he can do that. [...] It would look like the market is not feeling particularly confident that his ambitions will be achieved."
Update, 10/24/2022 11:20 a.m. ET: This story was updated to include comments from Tsang.
About the writer
Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more