Expectations that Xi’s speech would give stocks a boost (or at least, prevent a sell-off) were thwarted, and since “nothing special” was announced, Asian shares are following the overnight sell-off in the U.S., said said Castor Pang, head of research at Core Pacific-Yamaichi International HK.

Francis Lun, chief executive officer of Geo Securities, agreed. Investors were disappointed by the speech as they had been expecting some comments on economic stimulus or the further opening-up of the Chinese economy, he said. “But he didn’t mention it. That’s why A shares dropped 1 percent and also dragged down Hong Kong stocks.”

Eoin Treacy's view

Xi Jinping doused hopes he would be a reformer by denouncing Deng’s policy of hiding the nation’s strength and playing nice with the international community. Instead he has asserted China’s intention to be more assertive internationally, to become independent of the Dollar’s patrimony and to become independent technologically.

Coupled with the refusal to recycle excess funds back into US Treasuries, that is setting China on a long-term route towards competition both the USA and many of the developed countries that rely on it as a market for their exports.

The Chinese economy is slowing both in response to the weak global environment and curtailment of the shadow banking sector which has been ongoing for the last year. The cessation of that policy and/or a fiscal stimulus to support the economy is the best chance the global economy has for a new source of liquidity. One thing that seems almost certain at present is a new source of liquidity is required to reanimate animal spirits.