Why are some investors are leaving China?

Why are some investors are leaving China?
Source: Bloomberg, Quilal Shen

Some high profile global investors are pulling some money out of China. The main fear is that the risks don’t outweigh the rewards of being there. For example, many investors aren’t loving the optics of investing in China while it won’t turn away from Russia. The zero-COVID policy, which is leading to some pretty harsh lockdowns in places like Shanghai, is also making business as usual pretty tough. This is all amid President Xi’s campaign to regulate industries, which has led to crackdowns across the economy. Overall outflows from China’s investments, be it stocks, mutual funds or bonds, all accelerated after Russia’s invasion of Ukraine.

Key comments:

“Politics and governance factors should now set a cautious tone, especially for long-term commitments” to China, said Simon Edelsten of UK investment firm Artemis Investment Management LLP. “The Ukraine invasion raises these risks very sharply and our funds are likely to remain very lowly weighted in China for some years to come.”

Brendan Ahern, the chief investment officer at Krane Funds Advisors LLC, said that he’d seen “indiscriminate and price-insensitive selling” of Chinese shares by international investors in the last year. According to him, Beijing’s regulatory actions “felt like an attack on the most respected and widely foreign-held companies,” while sanctions on Russia raised concern the same could happen to China.