Foreign investors unwind $33bn bet on China

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Foreign investors are unwinding their $33bn bet on China. Nearly nine-tenths of the foreign money that flowed into China’s stock market in 2023 has already left, spurred by mounting doubts about Beijing’s willingness to take serious action to boost flagging growth.

Net foreign investment in China-listed shares peaked at Rmb235bn ($33bn) in August, when missed bond payments by developer Country Garden revealed the severity of a liquidity crisis in the country’s property sector. That figure has since dropped 87 per cent to just Rmb30.7bn, according to Financial Times calculations based on data from Hong Kong’s Stock Connect trading scheme.

Traders and analysts said the reversal reflected pessimism over the outlook for the world’s second-largest economy among global fund managers. And despite a run of positive economic data and geopolitical developments, Chinese shares have continued to underperform in recent weeks. Our reporters explore why.

Happy new year to all of our readers. We’re taking a short break for the holiday weekend, and will be back in your inboxes on Wednesday, January 3.

Five more top stories

1. The US has sanctioned groups in Turkey and Yemen that are allegedly responsible for funnelling money to Iranian-backed Houthi rebels. The move by Washington follows attacks on commercial vessels passing through the Red Sea and expands US efforts to curb financial flows to Iranian-backed groups in the Middle East since October 7. Here’s the latest on the naval attacks.

• Related read: Israel’s Benny Gantz, a member of the country’s war cabinet, has threatened to ramp up military action in the north to push Hizbollah forces further away from its border.

2. China has removed three senior leaders of military state-owned enterprises from a top political advisory body. The move is the latest step in President Xi Jinping’s sweeping overhaul, and tightening control, of China’s military. Read the full story.

3. Dealmaking sank below $3tn for the first time in a decade in 2023, with about $2.9tn worth of transactions struck globally this year, down 17 per cent from 2022. It was the first time since 2008-09 that the value of deals announced fell more than 10 per cent for two consecutive years, said the London Stock Exchange Group, which produced the data. Here’s why mergers and acquisitions are going through a lull.

4. The US has proposed that the G7 should explore ways to seize $300bn in frozen Russian assets, as the allies rush to agree a plan in time for the second anniversary of Moscow’s full-scale invasion of Ukraine. While no decisions have been made, the continued debate over confiscating Moscow’s assets for Ukraine highlights the issue’s rising importance for the west.

5. Exclusive: The departure of advertisers from Elon Musk’s X is driving up ad prices on LinkedIn, with annual advertising revenues at the Microsoft-owned group rising to nearly $4bn in 2023. That’s up 10.1 per cent year on year. “A few weeks ago most of our clients were off X. Now they are all off X,” said Leesha Anderson, the vice-president of digital marketing and social media at Outcast ad agency. Read the full story.

How well did you keep up with the news in 2023? Test your knowledge with our FirstFT year in review quiz.

We’re also reading . . . 

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• China policy: Those who spend their lives thinking about China strategy are routinely referred to as either “hawks” or “doves”. But former diplomat Charles Parton considers himself a drongo.

• 2024 reading list: From an AI-guided future to scandals in the art world and new fiction from Rachel Cusk and Colm Tóibín, don’t miss these book titles.

• Central banks: The world’s top rate-setters are rethinking their approach to forecasting after their high-profile failures to spot the most recent inflationary outburst.

  (For more on rate-setters’ battle against inflation, premium subscribers can sign up for our Central Banks newsletter by Chris Giles. Upgrade your subscription here.)

The most-read Opinion pieces of 2023

Helen Thomas’s warning that Beijing’s dominance in the electric vehicle market was leaving Europe in the dust clearly resonated with readers — her piece was the most-read comment piece of the year. Ruchir Sharma took a different tone towards China in another top read piece, as he provocatively declared: “It’s a post-China world now.”

• Bonus story: The second-most read Opinion story of the year was on none other than flight attendant uniforms. HTSI editor Jo Ellison’s views on the no-nonsense, practical redesign for the UK’s national carrier were humorously summed up by the following headline: “No sex please, we’re British Airways.”

Additional contributions from Sarah Ebner and Tee Zhuo