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Foreign investors have been bailing on China as its economy slows and tensions with the US escalate, and next year may not see a big rebound in capital inflows.
According to Mary Lovely, a senior fellow at the Peterson Institute, who told Bloomberg TV on Thursday that President Xi Jinping has identified the importance of foreign capital, Beijing’s policies continue to have a “deterrent effect” on investments.
“Our most recent finding is that not only has foreign investment in the country plummeted, but foreign investors are promoting assets in China, something we’ve never noticed before,” he said.
That comes as offshore investors have been turning bearish on Chinese stocks, with 2023 marking their lowest-ever amount of purchases in mainland shares.
The long-awaited economic rebound following China’s strict zero-COVID policies has failed to materialize, while a property crisis and pessimistic consumers are also holding back growth.
But domestic and domestic policies have also weighed on investment, and Lovely believes those trends will continue next year.
In China, leaders are most likely to favor strict regulation of foreign corporations while also giving the Communist Party a greater role in running the economy, he said. At the same time, U. S. policy will most likely continue to prioritize moving source chains out of China.
“We may in fact see depressed foreign investment into China for a good part of 2024,” Lovely said.
Last week, the Chinese Communist Party announced stricter regulations governing the video game industry, sinking stocks such as Tencent and NetEase. The country has also been cracking down on tech giants like Alibaba since 2020.
But as 2023 comes to a close, some signs of life have left the impression on Chinese markets. On Thursday, foreign investors poured $1. 9 billion into Chinese domestic stocks, the largest influx since July, Bloomberg reported. And last month, global investors bought $33. billions of Chinese bond net worth, the second-largest ever recorded.