This is not the first short spell of equity outflows for China, but it has been more violent
STATE MEDIA have not tried to hide the fact that billions of dollars in global investors’ funds have drained away from China in recent weeks. They have attributed the outflows—$11.5bn since the start of March and counting—to volatility in global markets, a hawkish Federal Reserve and the impact of Russia’s invasion of Ukraine on global supply chains. One government publication has downplayed the seriousness of the situation and speculated that foreign money will soon come pouring back in.
This time around, however, foreign investors say that deeper, structural problems are sapping China’s markets. The outflows have been more violent. And they have been accompanied by a global sell-off in Chinese securities. The Hang Seng tech index, which tracks many of China’s biggest tech groups listed in Hong Kong, is down by 45% compared with a year ago. The NASDAQ Golden Dragon China index, which includes similar companies listed in America, has fallen by 58% over the same period.
Instead investors point to China-specific factors. State meddling in the private sector and with tech companies has, of course, become commonplace. Another worry is that Xi Jinping’s support for Russia could lead to sanctions on Chinese companies. The war has also led to increased concerns over Taiwan, which China claims as its own and has vowed to take back by any means necessary.
The property market has also continued to wobble. On March 22nd Evergrande, a troubled developer, said Chinese banks had claims on $2bn of its cash, another bad sign for foreign creditors hoping to recover their investments.
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