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ELECTION 2022

China's stance on Russia-Ukraine conflict cause capital flight

ASIA
By Agencies | Apr 27th 2022 | 2 min read
China's national flag. [Courtesy]

 

The speculation of a possible Chinese invasion of Taiwan amid Beijing's support for Russia's military operation in Ukraine has triggered an unprecedented capital flight from China, various news outlets from Asia report.

This stems from the large offloading of Chinese government bonds by overseas investors in recent months.

The Hong Kong Post reported that China is facing a huge trust deficit from international investors as it witnessed a portfolio outflow worth nearly Sh1.8 trillion, last month.

Citing data from the Chinese government, CNN reported that the Asian country witnessed a record bond-market retreat by foreign investors in recent months with an offloading of Chinese bonds worth Sh6 trillion in February.

This comes as China's ambiguity concerning Ukraine-Russia is scaring away the investors.

Though the communist country refuses to criticize "friend" Russia's actions in Ukraine, Beijing has not done anything to help Moscow for the fear of attracting crippling sanctions from the West.

"There is nervousness about China's ambiguous, but Russia-leaning stance on the Ukraine conflict, which raises worries that China could be targeted by sanctions if it helps Russia," CNN quoted Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, as saying.

The American media outlet also cited "rate hike in the United States and China's strict COVID-related lockdowns" as a reason behind the capital flight.

China's rigid 'Zero-COVID' policy that led to the complete shutdown of scores of cities and towns, including Shanghai, its ports and airports, halting manufacturing and trade, has increased "uncertainties about future growth", said The Hong Kong Post.

According to analysts, the Chinese government's crackdown on private businesses late last year to instil fiscal discipline also had a cascading effect on the economy, affecting industry morale and making foreign investors more nervous as they don't want to play regulatory guessing games or worry that tomorrow's news may deplete another company or business model in China.

Amid such a situation, international organizations and investment banks have slashed their growth projections for China this year with the International Monetary Fund (IMF) reducing its prediction from 4.8 to 4.4 per cent. (ANI)

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