Everything was on hold in China until the conclusion of the Chinese Communist Party’s Congress over the weekend.

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Then there was a barrage of data and we found out what had been agreed on. Apparently, the markets didn’t like the result as Chinese stocks fell to levels not seen since 2008. The Hang Seng was the worst hit, dropping 6.5% in a single session.

So, what happened, and what does it mean for the broader market?

First, key data that was originally scheduled to be released last Monday was unexpectedly delayed. Authorities cited COVID restrictions as the cause, and the data was finally released at the conclusion of the Congress. There had been some worries in the markets that the delay meant that the data was less than favorable.

However, broadly speaking the key financial figures were above expectations, with quarterly GDP at 3.9% compared to 3.4% expected. But September data disappointed a bit, with both retail sales and industrial production growing, but not as fast as expected. September’s Trade balance was also better than expected, with both imports and exports rising above expectations. Generally speaking, the data wouldn’t explain such a dramatic move in the markets.

What changed?

As expected, President Xi gets to still be called President Xi for a third term, breaking precedent. But it was the changes in the Politburo and other offices that got the attention of the markets, as the moves were seen consolidating power in Xi. One of the key figures was the Premier, who will be replaced by the leader of Shanghai that oversaw one of the harshest lockdowns of the zero-COVID policy.

Both share a surname, but very different policies. The current Premier Li Keqiang is seen as generally pro-markets; while his successor Li Quiang is seen as getting the job primarily thanks to his loyalty to Xi. The premier is the second-ranking member of the Politburo, and will be in charge of the economy, and, crucially, revising the zero-COVID policy.

What happened to Hong Kong?

The other major event that happened over the weekend wasn’t related strictly speaking to the Congress: Guangzhou halted attendance at schools following a spike in COVID cases. The move dashed hopes that the zero-COVID policy would be changed following the Congress. Additionally, Guangzhou is strategically across the border from Hong Kong, which has been trying to ease COVID restrictions.

Global futures were trading lower though late Sunday as traders digested what was going on in China, but by early Monday started returning to the green. While analysts speculated that the consolidation of power around Xi raised potential geopolitical concerns, the underlying data from China remained within expectations. The political changes were well telegraphed, so for outside the country, the results aren’t likely to change the general trajectory in commodities.

Rather, there had been hope of a significant change in direction, particularly around COVID and the housing market. Usually, leadership staying the course will calm the markets, as it reduces political uncertainty. There could be a correction in far-east markets after investors have time to fully digest the situation and outlook.

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