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China's pro-Russia stance on Ukraine conflict sets foreign investors on hot retreat

Chinese President Xi Jinping shakes hands with then U.S Vice President Joe Biden inside the Great Hall of the People in Beijing on December 4, 2013. [Reuters]

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.

A media report indicates this has further seen a large offloading of Chinese government bonds by overseas investors in recent months.

The Hong Kong Post reports that China is facing a huge trust deficit from international investors as it witnessed portfolio outflow worth nearly USD 18 billion last month.

The country further witnessed a record bond-market retreat by foreign investors in recent months with an offloading of Chinese bonds worth USD 5.5 billion in February.

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

Though the communist country refuses to criticise "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 COVI-related lockdowns" as a reason behind the capital flight.

On Monday this week president Joe Biden affirmed that the United States would intervene militarily if China attempts to take Taiwan by force.

Although the White House quickly downplayed the comments, saying they don't reflect a change in US policy, this was the third time Biden said the US would protect Taiwan from a Chinese attack.

During a joint news conference with Japanese Prime Minister Fumio Kishida in Tokyo, Biden was asked if the US would be willing to go further to help Taiwan in the event of an invasion than it did with Ukraine.

"We agree with the One China policy. We signed on to it, and all the attendant agreements made from there, but the idea that it can be taken by force, just taken by force, is (just not) appropriate," said Biden in his reply to journalists.

In 2020 China expressed anger after US President Donald Trump signed into law measures that would further bolster support for Taiwan and Tibet, which had been included in a $2.3 trillion pandemic aid and spending package.

China had watched with growing alarm as the Trump administration stepped up its backing for Chinese-claimed Taiwan and its criticism of Beijing’s rule in remote Tibet, further straining a relationship under intense pressure over trade, human rights and other issues.

And in 2021 Biden said he had spoken to Chinese President Xi Jinping about Taiwan and they agreed to abide by the Taiwan agreement, as tensions ratcheted up between Taipei and Beijing.

"I've spoken with Xi about Taiwan. We agree ... we'll abide by the Taiwan agreement," he said. "We made it clear that I don't think he should be doing anything other than abiding by the agreement,” he said.

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", reported 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.