FX.co ★ Economic challenges trigger massive withdrawals from Chinese assets

According to the Financial Times, which references data from Stock Connect, foreign investments in Chinese stocks saw a dramatic decline of 87%, falling to 235 billion yuan ($33 billion) in 2023. This type of investment had reached its zenith last August, with only 30.7 billion yuan ($4.35 billion) remaining.

This situation is indeed perplexing. China has witnessed a significant reduction in foreign capital. Moreover, foreign investors withdrew nearly 90% of their investments from Chinese securities. What could have triggered their suspicions? Why is capital exiting, and how can this trend be reversed? These questions remain unanswered.

Analysts attribute the outflow of foreign capital from Chinese assets to various unfavorable factors. Among these factors is the lack of confidence among major investors in the Chinese government, as well as Beijing's reluctance to implement measures aimed at boosting the domestic economy. Furthermore, investors are alarmed by China's prolonged economic stagnation. According to traders and analysts, this trend reflects a prevailing sense of pessimism and raises doubts about the future prospects of the Chinese economy.

Back in August 2023, international investors began divesting from Chinese assets on a massive scale. The peak of these sell-offs coincided with the period when property developer Country Garden defaulted on its bonds. These events shed light on the depth of the liquidity crisis in China's property sector, as reported by the Financial Times.