After China’s Fourth Plenum and the U.S.–China Summit at APEC: Where Is Investment Headed?

The Fourth Plenary Session of the 20th Central Committee, which began on October 20, became a decisive moment for Xi Jinping’s leadership. Contrary to outside speculation about succession, Xi instead put forward long-term goals: the 15th Five-Year Plan (2026–2030) and the ambition to elevate China to a “moderately advanced” nation by 2035. In doing so, he signaled his intent for a de facto fourth term, showing determination to personally see these projects through.

Yet the road ahead is far from certain. Internal conditions remain fragile. One striking feature of this session was that three of the seven seats on the Central Military Commission remain vacant—a sign of instability at the very core of power. Since the disappearance of Xi’s close allies He Weidong and Miao Hua, Zhang Youxia, a “princeling” and first vice-chair, has effectively controlled half of the military authority.

This suggests that the PLA can no longer be treated as Xi’s unconditional base of support. China has shifted from a phase of external expansion to one where internal control takes priority. Political tension is now colliding with economic fatigue, producing fissures at the heart of the system. For investors and policymakers alike, China’s internal turmoil is no longer a background risk—it is central to the outlook.

China’s Last Card: The Stock Market

Political fragility feeds directly into economic dilemmas. The property sector remains mired in deep stagnation, household consumption shows no signs of recovery, and exports are under strain from simultaneous U.S. and European tariffs. Meanwhile, persistent renminbi weakness raises doubts about the durability of foreign capital inflows. Both domestic demand and external drivers are faltering.

With political foundations weakened and the economy under pressure, Xi has only one viable lever left: the stock market. A rising market boosts household wealth and consumption, provides funding channels for corporations, and serves as a visible signal of stability. Recognizing this, Beijing in 2025 launched an all-out “politicization of market support” campaign—cutting rates, deploying state funds, raising dividends, and channeling long-term institutional capital. Stock market stability is no longer just an economic objective; it has become a psychological pillar of political legitimacy.

In today’s China, where traditional power networks connecting the Party, bureaucracy, and society are eroding, the equity market has become a “regime reflection.” Its collapse would not only hit wealth—it could shatter the symbolic architecture of Xi’s authority. The regime has effectively transformed capital markets into an instrument of survival, a risky and unprecedented gamble.

The United States: Structural Preparation and Designed Cycles

By contrast, the United States has been preparing to manage crises as structured cycles rather than existential shocks. Supply-chain reorganization is over 90% complete: Korea, Japan, and Taiwan are embedded in advanced tech networks; Mexico and Vietnam serve as mid-tier production hubs. The U.S. has also secured critical resource ties with Australia, Canada, and even North Korea, shaping a robust “post-China system.” The design is clear: to insulate the U.S. and its allies from Chinese risks.

Short-term inflationary pressures remain. September CPI rebounded to 3.0%, with energy and food costs pushing higher. Yet growth is still robust—GDPNow estimates 3.9%, big tech earnings remain strong, and optimism around future industries is surging. This combination of high growth and moderate inflation gives Washington room to sustain liquidity, slow quantitative tightening, and even cut rates if needed—deliberately engineering conditions where a market correction does not spill into the real economy.

This is where the contrast is sharpest: the U.S. designs the cycle of crisis, while China fears the destination of crisis.

If the U.S. Faces Stagflation

Still, America is not immune. If tariffs and supply shocks anchor inflation in the 3.5–4% range, consumption could weaken and growth may slide below 3%. Such a shift would create a low-growth, high-inflation environment. In this scenario, the Fed might hesitate to cut rates—or even lean hawkish—effectively draining global liquidity and triggering a rapid contraction of risk assets worldwide. Equity markets would take the first blow.

For China, this would be catastrophic. Foreign capital outflows would accelerate, equities would collapse, and state fund interventions would lose credibility. At the same time, latent discontent within the PLA could surface, creating not just an economic challenge but a political and potentially military one. Xi’s regime, tethered to the mirror of the stock market, would see that mirror shatter—transforming an economic downturn into a political crisis, and possibly into a security crisis.

Following the Fourth Plenum, Zhang Youxia’s enhanced influence within the military further magnifies this risk: a market crash could evolve into a “non-military coup” or financial regime shock.

The Investor’s Formula for Fracture

The upcoming APEC summit will therefore matter greatly. If Washington and Beijing can reach pragmatic agreements to contain risks, 2026 may unfold in relative stability. But if frictions dominate, 2026 will likely bring twin crises—political risk and asset risk advancing together. The U.S. will leverage high liquidity and structural buffers to absorb shocks, but China faces a far harsher test.

For investors, the key is to look beyond headline indicators.

• Not just interest rates, but the political choices behind them

• Not just growth numbers, but the flow of capital through geopolitical fault lines

• Not just asset valuations, but which future industries survive uncertainty

These three factors will determine market direction. Those who can decode this divergence and embed it in their strategy will be the ones to capture returns in the volatile cycle ahead.