After the Communist Party of China (CCP)’s 20th National Congress, Chinese stocks immediately plunged. The wealthy Chinese lost up to tens of billion in one day.
Hong Kong’s Hang Seng index fell 1,030 points on Monday, October 24, two days after the closing of the 20th CCP Congress.
Stock indexes of major Chinese companies also fell sharply on the first day of the week. Tencent and Alibaba fell by 11.4%; Meituan fell the most, by 14.8%.
In addition, on October 24, U.S.-listed Pinduoduo’s Chinese shares fell 24.6% for the full day, evaporating $18.35 billion.
As the company’s share price falls, the wealth of the tycoons associated with it also declines.
According to the Bloomberg Billionaires Index, Huang Zheng, founder of Pinduoduo, lost $5.1 billion in value in one day. Tencent Holdings and Zhong Suisui, China’s richest man, each lost more than $2 billion. Alibaba’s Jack Ma and NetEase’s Ding Lei also lost $2.8 billion.
The Da Ji Yuan quoted some analysts as saying that China’s stock market plunge reflects concerns over the adjustment of the asset accumulation mechanism discussed at the 20th CCP Congress.
The content of the adjustment of the asset accumulation mechanism is a step the CCP wants to make to achieve the goal of “common prosperity” that Xi Jinping often mentions.
Alicia Garcia Herrero, an economist at Natixis, said that wealthy people in China could be afraid of this “common prosperity,” which aims to take away from the rich to distribute it to other sectors of society.
Writer Cai Zi commented that common prosperity would erode creativity, China’s economy would suffer a severe setback, and the era of individual enrichment could disappear.
Cai added that the super-rich would try to leave China. This is very detrimental to China’s domestic consumption and luxury goods market.
On October 19, the day the CCP proposed to “adjust the wealth accumulation mechanism,” the share price of Moutai, which supplies luxury goods in mainland China, fell by 3%. In the 5 trading days since October 19, Maotai’s share price has fallen more than 13%.