Beijing has taken steps to restrict access to critical data on domestic investments as foreign investors engage in significant sell-offs of Chinese stocks, raising concerns about capital flight in 2024.
This development, reported by The Financial Times, marks another move by the Chinese Communist Party to limit transparency around the country’s economic conditions as it grapples with market instability.
Starting from this Monday, the Chinese government has stopped providing daily data on net investment flows from foreign funds into mainland Chinese equities. Instead, these figures will only be released on a quarterly basis. This comes at a time when global funds have been pulling significant sums from China’s stock market, potentially making 2024 the first year of net capital outflows since the launch of the Stock Connect system in 2014.
According to data from the Hong Kong Stock Exchange, international investors have withdrawn over $12 billion from mainland Chinese equities since the beginning of June. Analysts believe this reversal of previous inflows—which had been supported by offshore divisions of state-backed institutions—has now resulted in negative net capital flows for the year. This shift is notable as it breaks a nearly decade-long trend of net positive investment into China via Stock Connect, a system designed to give foreign investors access to Chinese equities.
The Chinese government’s decision to limit data access coincides with growing efforts to shore up market confidence amid mounting concerns over the country’s slowing economy and ongoing troubles in the real estate sector. In May, Chinese regulators had already suspended access to real-time trading data on foreign investor transactions, citing similar concerns.
This latest move adds to a series of data restrictions by Chinese authorities in recent years. The practice of curtailing access to potentially negative data is not new in China. Last year, regulators banned some fund management companies from displaying the estimated net asset value of mutual funds. In a more high-profile example, Beijing also ceased publishing youth unemployment figures after the metric reached record highs.
The decision to limit data access is indicative of Beijing’s cautious approach to handling information that could undermine investor confidence. The sharp outflows of foreign capital follow concerns about China’s economic slowdown, exacerbated by the ongoing real estate crisis. Key sectors of the Chinese economy, including property, continue to face uncertainty, and Beijing is under pressure to mitigate the potential long-term impact.
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