Global investors turn away from China's market amid recession, Coronavir

Washington/Beijing: China, the second largest economy in the world, continues to suffer shocks. Last month, it was revealed that China’s economic growth rate had dropped to 0.4 per cent. After that, international investors are also turning their backs on China. According to a US-based Institute of International Finance (IIF) report, foreign investors withdrew large amounts of funds from Chinese bonds and stocks in July. At the same time, foreign investment from China has also decreased, and China’s leading allies like Russia and Pakistan have also been affected.

According to the Institute of International Finance report, foreign investors’ investment in China’s financial sector has been decreasing in the last few months. The Chinese bond market is worth nearly 20 trillion dollars. In the last few months, the continuous outbreaks of Coronavirus, the crackdown on companies in the technology sector by the Communist regime and the real estate crisis have led to a major decline in China’s economy. This has led to unease among international investors, which is why they are withdrawing their investments in China.

Foreign investors have been withdrawing funds from China’s bond market for six months. In July, it emerged that foreign investors also pulled funds from Chinese stocks along with bonds. Funds withdrawn from bonds by foreign investors in July amounted to a staggering 3 billion dollars. In the last six months, the Chinese stock market has withdrawn 3.5 billion dollars of funds. The CSI 300, China’s leading stock index, fell by seven per cent in July. IIF has pointed out that 2.5 billion dollars were invested in other countries known as ‘Emerging Markets’ even as funds were exiting China’s stock market. The study group noted in the report that foreign investment inflows into China would depend on factors such as statistics in China’s economy and China-Taiwan tensions in the years to come. Leading financial institutions have also indicated that the global economy will suffer a recession in the coming months. IIF claimed that its impact would also be seen on investment in China.

While foreign investment in China is decreasing, the investment from China abroad is also decreasing. Chinese President Xi Jinping started the ambitious ‘Belt and Road Initiative’ in the last decade. More than 1 trillion dollars of funds would be invested worldwide. Most of these investments were made in allies like Pakistan and Russia in the early days. However, the blows to China’s economy have also affected investments in these countries. In the first six months of this year, there has been no investment in Russia under the ‘Belt and Road Initiative’. Investment in Pakistan has fallen by a whopping 56 per cent.