Dividends and Financial markets signal unease after Xi tightens grip on China

Around the world, countries elect or select leaders who offer visions of what their country can or could become. Some end in up enriching themselves along the way, but all have power to influence. The longer the person has been in power, the more important aspect is who are the people behind the leader. Is the leader open to change? is the leader pro business? besides the power what does the leader hope to do with the country people and resources?

In China, their leadership believed similar to the US, after 2 terms or 8 years, a new leader should be selected. That was recently changed, and Xi Jinping remains as the top leader of China. In late October Premier Xi and the Communist Party of China had the Party Congress which reaffirmed his leadership.

In an article by Keith Bradsher and Alexandra Stevenson of the New York Times News Service, Mr. Xi pushed out rivals who had been perceived as pro-business and he also ensured the people around him are closer to his age or he has few rivals at the top level. Generally, part of the leader’s job is to bring up new talent in the pipeline. Mr. Xi is not doing that he has packed the Politburo Standing Committee with loyalists or yes people. (Centuries ago, Emperor’s had a person to say no and come up with reasons for no and their position was secure.)

Mr. Xi’s belief in the primacy of the party could shift the world’s second largest economy back toward a more state-led model. This model points national security and ideology would be a higher priority than maintaining a robust growth.

Linking to dividend paying stocks, most of us want consistent profits that can pay dividends that tends to be mean the status quo, but by not adopting changes the company can decline. There is a fine balance and margins can fall quickly which often takes new leadership to make changes to remain as a status quo. Usually when party loyalists trump everything else is good to have other alternatives ready.

There are more questions than answers, till the next time – to raising questions.

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