Foreign market players are reluctant to invest in China due to a recent shift in Beijing’s policies on high-tech companies. Apart from it, leaders of Western countries express tough rhetoric on China because of its dodgy trade practices. Such aversion is already squeezing Chinese financial markets. 

Chinese President Xi Jinping used to pursue the policy of attracting foreign capital to domestic markets for many years. Global investors were inspired by China’s economic miracle and lucrative opportunities. Nowadays, the second-largest global economy is facing a decline in financial globalization amid the mass exodus of foreign capital. China is becoming a financial pariah for a variety of reasons. First, investors are scared by unpredictable decisions of the People’s Bank of China, for instance, its crackdown on the high-tech sector. Second, an economic slowdown entailed by Beijing’s zero COVID policy dented global demand. Third, investors are averted by the fragile and highly volatile real estate market. The next argument concerns the mounting risks of China’s cooperation with Russia as foreign investors do not want to be subject to secondary sanctions. “The giant power of Western capital is starting to move away from China,” Matt Smith at Ruffer LLP commented on the capital flight from China. His $31-billion investment firm recently closed its Hong Kong office. Experts note that some European pension funds and charities do not want to include Chinese equities in their portfolios on the back of escalating geopolitical and management risks.

For the time being, almost every fourth European company is mulling over the scenario of withdrawing its business from China. Moreover, nearly 23 companies are poised to cut ongoing or would-be investments in China. Capital investments have already dwindled to the lowest level in a decade.