Why foreign investors are feeling jittery about China

STATE MEDIAMSCI have not tried to hide the fact that billions of dollars in global investors’ funds have drained away from China in recent weeks. They have attributed the outflows—$11.5bn since the start of March—to volatility in global markets, a hawkish Federal Reserve and the impact of Russia’s invasion of Ukraine on global supply chains. One government publication downplayed the seriousness of the situation and speculated that foreign money will soon come pouring back in.Indeed, China’s markets have experienced short spells of outflows in recent years only to see them reverse quickly, usually within two months. Onshore markets have mainly been a sure bet since the inclusion of many mainland-traded securities in several global indices, such as ’s flagship emerging-markets index, starting in 2018. Tens of billions of dollars’ worth of inflows have been ushered into China’s markets each year since then. Occasional outflows, once in 2019 and twice in 2020, have occurred in that time. During the most severe bout in July 2020 about $12bn drained away before net inflows resumed two and a half months later.