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Markets calm about Deng
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February 19, 1997: 6:26 p.m. ET
Investors cautious, but confident about leadership transition in China
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NEW YORK (CNNfn) - Top economists and investors say Chinese senior leader Deng Xiaoping's death Wednesday should cause little major turbulence in the world's financial markets.
Deng, who had been frail for several years and not actively involved in the Chinese government's day-to-day affairs, died Wednesday at age 92.
Financial markets seemed at least initially unruffled by Deng's passing, which the Chinese government announced after Asian markets had closed.
Wall Street -- which had been open at the time of the announcement -- remained steady despite the news. Other markets outside Asia only bobbled slightly.
Jean de Bolle, head market strategist at the investment firm Foreign & Colonial, told CNNfn that had Deng died a year earlier, "there was a risk of a political vacuum, which could have created (market) uncertainty. But right now, we see a continuation of (Deng's pro-market) policies."
Economists say China had already set in place a peaceful power shift that would leave a government headed by President Jiang Zemin and committed to continuing Deng's market reforms.
In addition, economists say that because markets had for several years expected a new leadership team to emerge in China, most investors already factored Deng's death into their strategies.
"China is handling this in its normal conservative way," said David Malpass, senior international economist at Bear Stearns.
Malpass also noted that Deng's government office in Beijing closed in early February in anticipation of his total withdrawal from Chinese leadership.
"What you have been seeing over the last year is the policy of Jiang Zemin, not Deng Xiaoping," Malpass said. (224K WAV) or (224K AIFF)
Other observers agree that the near future for China should be relatively calm, as the Asian powerhouse emerges as a regional economic giant with arms stretching from Shanghai to Hong Kong.
Some even believe volatility during a post-Deng transition will present buying opportunities.
"By the middle of the next century, China will be a great capitalist economy," predicted Peter Scott, chief executive officer of the British investment group Beta Funds. "I don't think anything can happen in the next few weeks or months to change that."
-- David Rynecki
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