Foreign investors are showing reluctance to invest in Chinese assets, as the country’s economic recovery struggles. Between December 2021 and June 2023, foreign traders sold off stocks and bonds worth $188 billion, according to Bloomberg. This trend comes as Beijing grapples with the challenges of stabilizing a crisis-ridden property sector and reviving growth.
The reasons for the outflow are multi-faceted. China’s economy has been underperforming, even after three years of zero-COVID lockdowns. The country’s equity and debt markets saw a decline of 17% as international investors pulled their funds out. Additionally, the Chinese renminbi has been weakening and the property market has faced consecutive crises for the past two years. President Xi Jinping’s hardline policies, whereby US semiconductor companies like Micron were banned and a regulatory crackdown wiped out an estimated $1.1 trillion in the market value of local Big Tech companies, have also contributed to the decrease in international investment.
According to a recent survey by Bank of America, avoiding China has become a top priority for investors this year. Only 15% of the surveyed fund managers expect Beijing to implement a substantial stimulus package that would revive the economy and boost stocks and bonds. The China Securities Index (CSI 300) has experienced a significant downturn of 23% since the beginning of 2022, while the S&P 500 in the US has only declined by 5% during the same period. Furthermore, fixed-income investors have also withdrawn approximately $26 billion from Chinese government bonds this year.
Overall, foreign investors’ aversion to Chinese assets can be attributed to the economic challenges faced by Beijing, the restrictive policies of President Xi Jinping, and the continued instability in the property market.