“Institutional U.S. investors in China better be paying attention to Xi’s speech with regard to ‘Common Prosperity’.” Kyle Bass
69-year-old Xi-Jinping was appointed to a precedent-defying third term as Chinese Communist Party (CCP) leader, but his third term is unlikely to be a charm, states Dr. Richard Haass, President of the Council on Foreign Relation. Xi has arguably inherited, largely of his own making, one of the most difficult economic, health, environmental, and national security challenges.
Attracting capital seen less important than Xi’s ideology.
Xi’s growing dominance has increased concern among global investors that Beijing has abandoned pragmatism for ideology, as the party shifts its focus from economic development toward security. Effectively, President Xi Jinping has put in place a wartime cabinet, warns Kyle Bass, Founder and Chief Investment Officer of Hayman Capital Management, and an ardent critic of China, in a Twitter post.
Bass commented that China’s 20th Party Congress purge not only installed Xi loyalists, but also installed two spy chiefs, and military leaders responsible for China’s ‘reunification’ strategy for Taiwan.
Moreover, President Xi Jinping sacked the only three men with markets experience (the heads of the PBOC, the CSRC, and finance minister). Xi also added the Ministry of State Security head to the Politburo and the Central Committee (Chen Wenqing).
“Chinese Communist Party (CCP) and its state champions have been using US capital markets to fund the development of China’s armed forces.” ~ Kyle Bass
These moves send a clear message to the world that conflict and ‘Great Struggle’ are coming soon, warns Bass. Not since Mao has a Chinese leader stacked his cabinet with hardliners with aerospace, weapons, surveillance, and military expertise. These moves by Xi signal that conflict with Taiwan is now around the corner.
Additionally, the Great Chinese Liquidation of public and private equity is in full swing, according to Bass. Today’s 10-20% crash in Chinese shares is just the beginning of the destruction of western capital invested in Chinese companies.
It appears that Xi’s ‘Great Struggle’ is also meant to inflict maximum pain to those who believed ‘reform and opening’.
Just think about what Henry Fernández (MSCI), Larry Fink (Blackrock), and Steve Schwarzman (Blackstone) have done to retirees with their pushing Chinese investments into everyone’s portfolios, states Bass.
Beijing’s sweeping regulatory crackdown on technology, education, food delivery and property sectors has sent shockwaves across global markets, driving Chinese markets down, Bass says. “It’s ‘unconscionable’ for global fund managers to invest in China.”
The writing was always on the Great Wall, opines Kyle Bass. Here comes the ‘Great Struggle’.
References: