Opinion | Spooked and stung, foreign investors must reassess China’s fast-moving economic terrain

The escalating Sino-American rivalry and broader concerns about China’s economy have caused Western firms to re-evaluate their operations there – and rightly so. Given the uncertainty surrounding President Xi Jinping’s economic policies and geopolitical intentions, it may be time for investors and corporate leaders to consider scaling back their exposure to Chinese assets and markets.

The events of the past year, particularly Xi’s dogged refusal to ease his strict zero-Covid policy and his confirmation as China’s first three-term president, have spooked global investors.

Likewise, Xi’s “common prosperity” agenda, which aims to redistribute wealth and rein in the country’s new business elite, has been viewed as anti-business and damaging to economic activity.

As part of his common prosperity campaign, Xi pledged that the authorities would “reasonably regulate excessively high incomes and encourage high-income people and enterprises to return more to society”. With this kind of rhetoric, it is no wonder that China’s stock market dropped by roughly 20 per cent last year.

China’s policies have also led to vast capital outflows and an accelerated sell-off of Chinese stocks. According to the Institute of International Finance, investors withdrew US$7.6 billion from Chinese equities last month, along with US$1.2 billion from the bond market.