Wall Street is increasingly pulling its money out of China as the country’s economy continues to struggle amid a real estate crisis and troubling economic data, according to The Wall Street Journal.
Government data from China shows that institutional investors have pulled out over $31 billion in stocks and bonds from the Chinese financial system this year through October, marking the worst outflow since 2001 when the country joined the World Trade Organization, according to the WSJ. The Chinese economy has failed to show significant economic improvement since the COVID-19 pandemic due to a debt-laden real estate sector coupled with recent purchasing managers indexes in November showing a decline in both the manufacturing and service sectors. (RELATED: ‘The Narrative Isn’t Clear Yet’: Recession Risks Cloud Wall Street’s 2024 Outlook)
To exacerbate China’s economic woes, more foreign investment is leaving the country than is coming in for the first time since the 1990s, as a large number of foreign manufacturers and other companies flee, according to the WSJ. Top financiers told Wisconsin Rep. Mike Gallagher at a recent event that they were pulling back their investments in the country, with one of the people in attendance saying there had been “a bit of an awakening” from U.S. financiers about the risks involved in Chinese investments.
🇨🇳 Chinese stocks and bonds see massive outflows
“Wall Street is retreating from China as the country’s decadeslong economic boom is ending.” – WSJ pic.twitter.com/gdXzbgs4Ng
— Leo (@LeoNelissen) December 7, 2023
The Chinese economy is being weighed down by a real estate crisis, a sector that once contributed heavily to the country’s economic growth but is now debt-laden and at risk of bankruptcy. Companies responsible for the construction of around 40% of Chinese homes have defaulted on their debt since 2021, with major developers Evergrande and Country Garden now threatening to default as well.
Investors are also finding China increasingly hostile to businesses on national security matters, with the country starting investigations and even raiding foreign firms over investment risks and restrictions on access to data, according to the WSJ. (RELATED: Italy Pulls Out Of China’s Belt And Road Initiative, Despite Beijing’s Warnings)
Despite the concern around doing business in China, many business leaders are still interested in tapping into the large Chinese market, with a number of them attending a dinner in the U.S. featuring Chinese President Xi Jinping in November for the purpose of establishing a better bilateral economic relationship between the two countries. Hundreds of executives were in attendance, including Apple CEO Tim Cook, Black Rock CEO Larry Fink and Tesla CEO Elon Musk, with the Chinese president ultimately receiving a standing ovation from his American audience.
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