"When we try to guess where the
euro zones politicians are heading, we have lots of
information, and the trick is to figure out which parts are
real and which are deliberate disinformation," one London-based
macro trader explained to me. "When we try to guess what the
Chinese are up to, we have much less information, and sometimes
it feels like its all disinformation."
The Communist Partys 18th
Party Congress, which ended this week in Beijing after picking
the countrys new leaders and replacing most members of
the Politburo Standing Committee, the partys ruling body,
provided plenty of fresh information but left many market
participants struggling to make sense of it all. "When the
entire leadership of the worlds second-largest economy
changes, surely financial markets have to react," the trader
mused. "The question is, react to what?"
How will Beijings leadership
transition move markets, and what do we watch for clues?
Xi Jinping and Li Keqiang came out
on top, as expected, and there were few surprises about the
other five members appointed to the Politburo Standing
Committee, the partys ruling body. But the politicking
and jockeying for position isnt over yet. "Now that the
top seven are in place, we are going to see ripple effects and
reshuffling down the line of all their competing and
overlapping patron-client networks," one Beijing-based former
diplomat e-mailed me.
The date of the party conference
had been pushed back, not so much because of the scandal
surrounding Politburo candidate Bo Xilai, whose wife murdered
the hapless British citizen Neil Heywood, but rather because of
deep disagreement over who would sit around the top table. In
Beijing, even more than in Washington, personnel is policy.
Every major policy in China is up for review by Xi, Li and
their new team. The Standing Committee meets weekly and makes
all the important decisions political, economic,
military, social and cultural.
The transfer of power is staggered.
The Politburo this week endorsed Xi as the new secretary of the
party. The National Peoples Congress is due to confirm
him as president, replacing Hu Jintao, when it meets in March,
as well as approving Li as replacement to Wen Jiabao as
premier. Even when they are formally in office, it will take
time for them to consolidate power, considering all the party
elders looking over their shoulders (neither Hu nor his
predecessor, Jiang Zemin, are going to disappear).