An Interview with Charles Li, past-CEO, HKEX

A: The fundamental logic behind Mr. Xi’s pronouncements on Common Prosperity is clear and there is broad support for them. What is not clear is how the government agencies charged with the related tasks are planning to execute them. There is a tendency in China: as senior-level policy priorities shift by an inch, the central and provincial governments may move things by a foot. And then, when it comes to the local government, that may go into a few yards. When that happens quickly, it can cause shocks to the system. Excesses may then require corrective or mediating actions.

Some argue that this may be the natural outcome of China’s current model of governance particularly at the provincial and local levels, where responsibility sits upstairs while accountability sits downstairs. What we see on the ground may not necessarily reflect what policy has intended to achieve. In recent months, we’ve seen this play out in the form of aggressive corrections in the property sector and the internet sector, among others. This has caused some anxiety particularly in the markets.