Foreign Investors Ditch China For Abetting Ukraine Invasion
Investors are ditching China at an unprecedented scale as a cocktail of political and business risks, and rising interest rates elsewhere, make the world's second-biggest economy a less attractive place to keep their money, Laura He reported for CNN.
Photo Insert: China witnessed $17.5 billion worth of portfolio outflows last month, an all-time high.
China witnessed $17.5 billion worth of portfolio outflows last month, an all-time high, according to the most recent data from the Institute of International Finance (IIF).
The US-based trade association called this capital flight by overseas investors "unprecedented," especially as there were no similar outflows from other emerging markets during this period. The outflows included $11.2 billion in bonds, while the rest were equities.
Data from the Chinese government also showed a record bond-market retreat by foreign investors in recent months. Overseas investors offloaded a net 35 billion yuan ($5.5 billion) of Chinese government bonds in February, the largest monthly reduction on record, according to China Central Depository and Clearing.
The sell-off accelerated in March, hitting a new high of 52 billion yuan ($8.1 billion).
"China's support for the Russian invasion of Ukraine was clearly the catalyst for capital to leave China," said George Magnus, an associate at the China Center at Oxford University and former chief economist for UBS. China and Russia proclaimed in February that their friendship had "no limits."
That was before Russia invaded Ukraine. Now, with Russia's slapped with sanctions worldwide, Beijing has not rushed to help out its northern neighbor, fearing that it, too, could be slapped with sanctions. But it has also refused to slam Russia's attack on Ukraine, seeking to portray itself as a neutral actor and blaming the situation on the US.
"There is nervousness about China's ambiguous, but Russia-leaning stance on the Ukraine conflict, which raises worries that China could be targeted by sanctions if it helps Russia," said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, who has studied China's economy and US-China relations.