China’s Slowing Growth Has Investors Running For the Exit – The Average Joe

    China’s Slowing Growth Has Investors Running For the Exit

    Victor Lei — Head of Research

    November 7, 2023

    November 7, 2023

    China has long been a foreign investment hotspot for its high and consistent growth. But pay any attention to their economic news, and you’ll know their growth anything but consistent. High? Debatable.

    In recent years, foreign investors have soured on China over its slowing growth, political gyrations and a lack of visibility into the country. For global investors, the economy has become nearly impossible to navigate.

    Where do we start… The country’s declining population, which fell for the first time in six decades last year has been cause for alarm — particularly for the country’s bloated real estate market, representing 25-30% of its GDP. In the last three years, over 50 developers have defaulted or failed to make debt payments.

    • China has ramped up investigations and hostilities towards international (and even its own) companies — sending the Shanghai Shenzhen CSI 300 Index, China’s largest stock index, down almost 40% since its 2021 high.
    • In June, the country’s youth unemployment rate grew to 21.3%, and shortly after, China said it would stop publishing many official economic stats (incl. the youth unemployment data).

    Looking for greener (money) pastures

    This week, the IMF upgraded China’s growth outlook to 5.4% this year and 4.6% the next — while JPMorgan’s China chief equity strategist gave a bullish view yesterday on the country’s stock market and economy. Still, companies and investors are split on China’s outlook — and many have begun shifting their efforts to other countries:

    • In the third quarter, net direct foreign investment in China turned negative for the first time on record — as investors pulled $11.8B out of the country compared to a $101B inflow at the start of 2022.
    • Only 45% of US companies see China as a top-three market for investment, according to the American Chamber of Commerce — compared to 60% in 2022.

    The US distances itself: In July, Mexico surpassed China to become the US’ biggest trading partner. China responded by leaning towards its BRICS (i.e., Brazil, Russia, India, etc.) trading partners — who are taking a larger share of China’s trade. In the coming years, the two major economies are bound to face off in some of the most advanced industries — as China’s electric vehicle industry expands while the US’ slows — and the semiconductor trade war heats up.

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