China and Hong Kong stocks fall as Xi Jinping secures 3rd term

Yahoo Finance’s Kevin Cirilli discuss how Chinese stocks are performing after Chinese leader Xi Jinping consolidated power at the Party congress.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: Yahoo! Finance contributor Kevin Cirelli is here to break it all down. Kevin, take it away.

KEVIN CIRILLI: The Chinese stocks falling the most since 2008, and those in Hong Kong. Clearly, a signal that the market reaction, investor reaction, is a bit perplexed by what we saw coming from General Secretary Xi Jinping last week and into the weekend, in terms of the five-year term-- his third five-year term that he is going to now be leading the Chinese Communist Party.

But there's a stark contrast in terms of now what investors worldwide and how they must look at the Chinese Communist Party. Because unlike in the West, where investor reaction in the market can oftentimes shape policies and policy makers in terms of how they are looking to guide various policies, that's essentially not the case in China, where Xi Jinping has in his public remarks, as well as in the team that he has assembled around him, has virtually no dissenting opinion. And has signaled that he is looking to consolidate power, both economically, militarily, as well as technologically.

BRAD SMITH: Kevin, what does this mean for Taiwan?

KEVIN CIRILLI: Yeah, well, I think when you look at specifically the amendment that was drafted into the Chinese Communist Party's platform, it makes it quite clear. In which they said, that the CCP-- they added an amendment to, quote, "firmly oppose and contain Taiwanese independent," end quote.

Now, Taipei has pushed back on that. They have said that this-- Taiwanese officials have said publicly, that they cannot be cursed by the Chinese Communist Party. And you've seen pushback, even bipartisan pushback, from Capitol Hill, where you have the Senate Foreign Relations Committee doubling the amount of allocated defense resources for Taiwan to $10 billion in a line that was added just earlier this month to the Defense Authorization Act.

That was actually double the $5 billion that a bipartisan group of lawmakers had wanted in terms of arms assistance for Taiwanese to defend itself, should China continue to change the goalpost for their policies that have been decade-long.

I would also note just quickly, I mean, historically, when you look at this-- if you go back in the long-term back to 1971 when former President Richard Nixon tried to normalize relations with the PRC, tried to normalize economic ties between China, the world's second-largest economy, and the United States. Contrast that to 2013, 2014, when we thought we were gonna get a more economically attentive Chinese Communist Party. That's not the case.

And this is just within the last couple of years, whether it's Taiwan, whether it's technology, or whether it's the economy. This is a stark departing that we've seen in the last week, laid out in plain speak from Xi Jinping.

BRIAN SOZZI: Kevin, I'm on the Yahoo! Finance platform right now. Really just seeing some of these stocks, China-based stocks, absolutely hammered. Xpeng, NIO, electric vehicles. And China had supported a lot of these industries in recent years. But is the read here this morning that maybe at some point, they take these companies and they bring them into their own fold, and then they're no longer public.

KEVIN CIRILLI: Well, they're reacting. They're reacting to what Xi Jinping said, which is that when it comes to critical high tech, China intends to win. Whether it's autonomous vehicles, underwater cables, 5G, 6G, quantum computing, you name it. They are looking to lead in tech authoritarianism.

And that is why you're seeing groups where I'm under fellowship, like the Global Tech Security Commission, bipartisan lawmakers, trying to figure out the policy to draw that contrast. And so the difference, though, Brian, is that when you look at what the investors and how they are reacting, it's not a doubling-down of embracing China's economic worldview, it is a departure from that.

And I think you're going to be seeing that coming from Washington DC policymakers on both sides of the aisle, quite frankly, based on the conversations that I'm having, as well as from the market reaction and investors-- not just in the United States, but also in Europe. Because they have to decide if they're gonna have a plan should Xi Jinping continue to do what he says he is going to do.