“Common prosperity.” That’s what Xi Jinping’s ostensibly trying to promote and propagate in China.

He’d tell you it’s going swimmingly. That everyday Chinese are reaping bountiful benefits from the diffusion of “Xi Jinping Thought” into every aspect of daily life.

If you live in China, you’ll agree with Xi on that point, and on every other point besides. Or else Party officials will come to your home, point you to the backseat of a car and haul you away.

I’m just kidding. Except not. Xi’s a lunatic and China’s becoming a basket case commensurate with the Party’s descent into absolutism.

On Thursday, the CSI 300 fell a second day, on track for a fourth consecutive weekly loss, the seventh in eight and — get this — the 14th in 17. If you don’t remember the fleeting, state-engineered “recovery” that stalled out in May, don’t worry: Nobody else does either, and it’s anyway dead now. Like capitalism in China.

The benchmark’s the lowest since January of 2019, and it’s 45% off the February 2021 highs. Consider this: As of next week, the gauge will have spent 31 months down more than 20% from those early-2021 highs.

I think — I hope — Western analysts are starting to come to terms, however grudgingly, with the reality that you can’t view Chinese equities through any sort of traditional fundamental lens when it comes to assessing the investment case. I’ve said it time after time after time in these pages: There’s only one “fundamental” that matters, and that’s Xi. At any given time, he can (and has) rendered all other considerations irrelevant for publicly-traded Chinese firms.

There are two main reasons Westerners have such a hard time coming to terms with that reality:

• Young analysts don’t get it because they don’t have any sense of history and were raised in an era of short attention spans and narrow curricula. They’re only literate if the words are “printed” on a monitor or a screen, and because their education subordinated every other consideration to “marketable” skills, they have no context for a scenario in which the ghost of a 20th century dictator decides to make profits illegal in their coverage universe (e.g., Xi’s 2021 crackdown on China’s once-lucrative after-school tutoring industry).
• Older analysts don’t get it because they thought the capitalism versus communism debate was settled in November of 1989, and they’re so indoctrinated after spending the next three decades not only immersed in the cult of capitalism, but blissfully ensconced in its well-adorned, inner-most chambers (i.e., working in finance), that they simply can’t conceive of a deliberate effort to impede market forces.

So, here we are. Day in and day out, pretending (or in some cases not pretending) to be befuddled by the tension — it’s actually wholesale incompatibility — between Xi’s “Thought” (proper noun) and the capitalist precepts we Westerners habitually confuse with natural laws.

The figure below’s simple. The CSI 300’s on track for a fourth consecutive annual decline (that’s never happened before, so congratulations to Xi on another unprecedented milestone), and IPO activity has dwindled to almost nothing.

Part of the deal drought is the relatively moribund economy. Of course, that’s Xi’s fault too, so I’m not sure why I mention it as though it’s a mitigating factor. But there’s also the “small” problem of his crackdown on brokers and investment bankers. Specifically: He’s capping their pay and arresting them.

In a piece published this week, Bloomberg documented “detentions and arrests of numerous financial professionals.” Xi, you’re reminded, isn’t averse to executing people for white collar crime.

As righteously furious as Main Street was with Wall Street in 2008, I doubt seriously that a majority of Americans would’ve supported the death penalty for decision-makers at the nation’s largest financial institutions, and it’s anyway unclear what, exactly, the dozens upon dozens of detained and “disciplined” Chinese dealmakers actually did wrong. In some cases, we’ll never know. And maybe they (the accused) won’t either.

The same linked reporting said Chinese financial institutions have informed workers that the Party’s sifting through IPOs and that anybody “could be called in for questioning at any time.” Talk about a chilling effect: Small wonder ECM activity dried up. Who in their right mind would put their name on something knowing Xi’s combing through deals looking for an excuse to hang somebody?

And it just goes on. Seized passports. And on. Extraterritorial arrests. And on. Salary limits. And on. Retroactive pay cuts. All in the name of rooting out “graft,” the definition of which can be anything Xi wants it to be.

A few months back, Bloomberg ran a “Big Take” piece called “China’s Investment Bankers Join the Communist Party as Morale (and Paychecks) Shrink.” The accompanying audio carried this title: “China’s Top Bankers Embrace Communism.” The question I have is when Western bankers will likewise “embrace communism” by abandoning the (by now thoroughly disproven) notion that Chinese markets can be analyzed, viewed or otherwise considered through the lens of capitalism.

Earlier this week, China Renaissance — the boutique investment bank whose shares spent 17 months in limbo following the onset of a government investigation — reopened to a 72% plunge. In February of last year, the firm said it lost contact with famous dealmaker Bao Fan, the firm’s CEO, co-founder and controlling shareholder. China Renaissance subsequently delayed its audited annual results and suspended its stock, saying it couldn’t determine Bao’s whereabouts.

A year (almost exactly) after he disappeared, the firm said in a regulatory filing that Bao was stepping down as chairman “for health reasons and to spend more time on his family affairs.” Bao’s net worth collapsed this week with China Renaissance’s now-trading equity. At the height of his influence and fame, Bao was worth nearly a billion. As of this week, he was worth just $50 million. Wherever he is.