China’s yuan weakened and country’s stocks tumbled to the lowest level since the depths of the 2008 global financial crisis in Hong Kong, a stark rebuke of President Xi Jinping’s move to stack his leadership ranks with loyalists.

The offshore yuan weakened as much as 0.7 percent to 7.2782 per dollar Monday morning to approach a record low seen last week. The Hang Seng China Enterprises Index, a gauge of Chinese stocks in the city, plunged more than 5 percent to the lowest since 2008 even as economic growth data beat estimates. China’s benchmark CSI 300 Index fell as much as 1.9 percent.

Market setbacks following the reshuffle, which highlighted Xi’s unquestioned grip over the ruling party, show deep disappointment over a likely continuation of policies staked on Covid Zero and state-driven companies. Tech giants Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Meituan all tumbled as investors remained skeptical that Xi and his allies will seek a rejuvenation of private enterprise.

“The market is concerned that with so many Xi supporters elected, Xi’s unfettered ability to enact policies that are not market friendly is now cemented,” said Justin Tang, head of Asian research at United First Partners.

While the appointment of Xi’s allies may help accelerate key agendas, the addition of Covid Zero advocates to the Politburo Standing Committee diminishes the chance of any early loosening of Covid restrictions.

“The more centralised power becomes, the more the risk of overzealous policy implementation based on directives from the top,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics Ltd. “This happened in some of the lockdowns in the second quarter.”

Investors were disappointed during the congress last week as Xi defended his Covid Zero policy and fell short of offering stimulus to shore up the property market. The onshore yuan fell to the weakest level in 14 years and the CSI 300 slumped in all but one session last week.

A slew of China’s key economic data — released Monday after an abrupt delay lat week — showed a mixed recovery.

The economy grew faster than expected in the third quarter with industrial activity improving despite Covid restrictions and a property slump, but retail sales weakened.

Meantime, the People’s Bank of China set the yuan fixing at 7.1230 per dollar, away from the recent pattern of near 7.11 per dollar.

“The yuan fixing above 7.12 implies that the PBOC may start to loosen its tight grip on the CNY fixing,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank. Solid GDP figures highlighted rebound momentum after the Shanghai lockdown, but weak retail sales indicate Covid restrictions are still weighing on consumption and growth, he said.

By Lin Zhu, Tania Chen and Jeanny Yu

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