Chinese shares rose on Monday morning after Beijing unveiled a series of measures to halt nearly a month of decline. But the rally proved short-lived as foreign investors used it as an opportunity to offload $1.1 billion into mainland Chinese equities, according to Bloomberg data.
China’s CSI 300 index, which tracks the performance of the 300 largest companies on the Shanghai and Shenzhen stock exchanges, rose as much as 5.5% on Monday, paring most of its gains and ending the day up only 1.17%.
Over the weekend, Chinese authorities halved the tax they charge on stock trades, called “stamp duty”, and introduced a tax on borrowing money to invest in stocks in a bid to “boost investor confidence”. Reduced the collateral amount to be deposited by the merchant. According to a Google Translate statement from China’s Ministry of Finance. Bloomberg, citing unnamed sources, reported that Beijing has also asked some mutual funds to avoid becoming net sellers of equities.
Despite these steps, foreign investors continue to flee Chinese markets. With Beijing cracking down on foreign consulting firms and repeatedly telling investment firms to avoid selling stocks when markets are volatile, amid tensions between the US and China, investors are increasingly worried about the risks of keeping capital in China. have been
In the first half of this year, the number of active China-focused hedge funds fell for the first time in more than a decade. In the second quarter, direct investment liabilities – a measure of foreign direct investment in China – fell 87% from a year earlier to a record low of $4.9 billion, according to data released Friday by China’s State Administration of Foreign Exchange. Gone.
China’s weaker-than-expected post-Covid recovery and long-standing economic issues – including an asset crisis, skyrocketing youth unemployment, nearly $13 trillion in local government debt and shrinking profits for industrial firms – also There has been a slowdown in foreign investment. in country.
the story continues
“The change in global capital flows is seismic,” Robin Brooks, chief economist at the Institute of International Finance, wrote on Sunday. Post on X.com. “Over the past decade, China has attracted massive capital inflows towards EM [emerging markets], often at the expense of other BRICS. But China has seen steady and massive outflows over the past 18 months, as investors grow wary of an autocratic regime.
In a wider sign that China is becoming a less friendly place for investors, Chinese millionaires are leaving the country in large numbers amid regulatory crackdown against large private companies. The country will lose a record 13,500 millionaires this year, according to new estimates by migration consulting firm Henley & Partners. Private Wealth Migration Report. This results in the loss of around 10,800 millionaires in 2022.
mending a broken relationship?
Against this backdrop, Commerce Secretary Gina Raimondo on Monday sought to mend the fractured ties between the two countries with a visit to Beijing. Raimondo and Chinese Commerce Minister Wang Wentao agreed to set up a group to “find solutions on trade and investment issues” after several hours of discussions, a sign that Washington is changing its attitude toward China Is.
“The world is counting on the United States and China to responsibly manage and maintain our commercial relationships,” the Commerce Secretary said. “This is a conversation where we increase transparency,” he said.
Just days before Raimondo’s visit, the Commerce Department removed 27 Chinese companies from a list that barred them from buying American technology.
In a statement, China’s Ministry of Commerce described the move as “conducive to normal trade between Chinese and American companies,” and said it was now “entirely possible to find a solution that benefits companies on both sides.”
Wang also took a positive stand after meeting Raimondo on Monday. He told the US Commerce Secretary, “I look forward to working closely with you to foster a more favorable policy environment for stronger cooperation between our businesses to grow bilateral trade and investment in a steady and predictable manner. “
This story originally appeared on Fortune.com
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