$188 Billion Pulled From Chinese Market | China In Focus

A money exodus from Chinese stock markets. The amount? Over $180 billion dollars. Is China's world market clot waning? Plus, an emerging investor sentiment. Avoid China. A Bank of America survey detailing a pessimistic outlook for China's economy among 200 foreign investors. With experts warning of an even bigger housing crisis than the embattled Chinese property giant Evergrande. What's really going on with China's economy? What do you think? Let us know below. And subscribe if you haven't already. Welcome to China In Focus, I'm Tiffany Meyer. Over $180 billion dollars. That's how much money has pulled out of China's stocks and bonds markets since 2022. The shift speeding up China's apparent decoupling with the West and reducing China's clout among global investors. That $180 billion dollar outflow is a deep cut amounting to a 17 percent drop. That's based on Bloomberg's calculations from China's central bank data. In August alone, about $12 billion in foreign investment flew out of China, also breaking records. This comes as China's economy is reeling. A crisis in the real estate sector deepening and tensions with the West on the rise. While foreign investments are shifting away. China's domestic economy isn't looking good either. Its youth unemployment rate hit a record 21 percent in August. It got so severe that Chinese authorities stopped updating it for fear of damaging its reputation as a manufacturing hub. For the Chinese Communist Party, clusters of educated and unemployed young people in big cities could become a challenge to its authority. And for years, Beijing has been relying on economic growth to boost its legitimacy. Now, that method is losing its grip under a reeling economy. Provincial governments in China are in trouble as well. Most of them have run out of money, with the outstanding bill standing at over $5 trillion. Many regions are at risk of default. The situation is also getting harder for China's educated elites. The deepening crisis in the housing sector cut through competition in education and hefty fees in raising children, all making it harder for them to uphold their living standards. None of them expect the Chinese economy to get better over the next year. Avoid China, that's what investors are saying, according to a Bank of America survey. The bank surveyed investors with $616 billion in assets under management. They found that few are confident the country's economy will improve in the near future. That response is a night and day difference from February, when nearly 80% said China's economy would make headway. This shifting view has prompted a major change in where investors are sending their money, with more funding headed into the U.S. and money getting pulled out of China and developing nations. Investors cite China's real estate troubles as the number one factor that could cause the next global credit crisis. The pessimistic outlook on China's property sector also sent Chinese stock prices plunging. Mainland Chinese listings on the China Securities Index, a major Chinese stock market indicator, fell to the lowest level this year. Dark skies are on the horizon for the world's most debt-ridden property developer. Shares of China's Evergrande Group took a nosedive Monday, dropping a massive 25% in the morning. What sent investors running for the hills? Beijing may be planning a new probe into the giant. That's after Chinese police detained certain staff members who work for the company's wealth management department. It's reportedly headed by General Manager Du Liang, also the unit's legal representative. Police in China's Shenzhen City confirmed the incident on social media, saying they took criminal compulsory measures against Du and other suspected criminals at Evergrande. The statement didn't say how many were detained, what charges were imposed, or when they were taken into custody. The incident follows the company's return to public trading after a 17-month suspension through August 28th. A bigger-than-ever housing crisis is looming over China. The nation's largest private property developer, Country Garden, is now on life support as investors and buyers back out of the real estate industry. Over the years, the company has spent much of its efforts building up the epicenter of China's real estate sector, rural cities and industrial areas. And that sector drives China's economic growth. But what's behind the downturn? The answer? Debt-laden local governments and a mass exodus of residents. Just two years ago, China Evergrande Group, another property giant, popped the regime's real estate bubble after flourishing in borrowed money for decades. The housing industry contributes about a quarter of China's GDP. Economists predict that China's real estate crisis will likely be prolonged. More on China's real estate crisis. Last month, housing prices dove to their cheapest point in almost a decade. Beyond that, data on the cost of new homes is also seeing a downturn. What caused the nationwide decline? Exports point out three factors. Low purchasing power among buyers, low profit expectations, and that the supply of homes now exceeds demand. Back to the declining data, housing prices are facing a 15 to 25 percent drop, according to real estate agencies. And that figure even holds for high-end communities in China's major cities, which are supposed to be more stable. The data shows a notable contrast compared to China's official data, which reflects the biggest price drop at just 6 percent. China's official statistics bureau relies on surveys of market research, which may not be transparent or up-to-date. Last month, investments in China's property sector also fell by almost a fifth. That's despite recent strategies and measures from Beijing to counteract the fall, like cutting the mortgage rate and reducing the minimum for down payments. Worth noting, Beijing set a 5 percent GDP growth goal for the year early in March. But its economic woes are progressing, with only three months left to recover before 2024. And more on the money front. China's central bank just lifted temporary curbs on gold imports last Friday. Experts warn authorities often stockpile gold while preparing for war, and that Beijing may be gearing up ahead of potential sanctions that could get slapped on the country because of it. Some liken the situation to Russia's invasion of Ukraine. Moscow chose to link gold with its currency, the ruble, to cope with depreciation under Western sanctions. Back to the latest ban removal. The restriction was originally levied to stabilize China's currency, the RMB, also known as the yuan. Instead, the decision sent precious metal prices in the country spiking. The largest gold buyer year to date, China owns over 18-thousand tons of gold. Switzerland is China's biggest gold source overall. In June alone, gold shipments to China exceeded 40 tons, with Beijing's total for the month hitting about 100 tons. Beyond that, Russia has become one of China's preferred gold importers due to discounted prices from Moscow. Chinese investments in Brazil are at their lowest in over a decade, plunging by almost 80 percent in 2022 compared with the previous year. That's despite China's status as Brazil's largest trading partner. Last year, China funneled $1.3 billion in investment dollars into the country. That's the lowest the number has been since 2009. A chief strategist at Clocktower Group says China isn't the driver of emerging markets anymore due to a struggling economy. The Council on Foreign Relations says China usually invests in Latin America to expand its political influence in the region. U.S. officials previously raised concerns about that. Admiral Craig Fowler, the former head of U.S. Southern Command, wrote in 2021, "...we are losing our positional advantage in this hemisphere and immediate action is needed to reverse this trend." A quiet meeting of top U.S. and Chinese diplomats in Malta over the weekend. Experts say the session could help smooth the path for leaders Joe Biden and Xi Jinping to meet in November. What's next for China-U.S. relations? Let's zoom in. White House National Security Adviser Jake Sullivan met with China's top diplomat Wang Yi in Malta over the weekend. The White House says talks were candid, substantive and constructive. Some issues discussed were global and regional security, the war in Ukraine and Taiwan. Sullivan reportedly noted the importance of peace and stability across the Taiwan Strait during the meetings. Taiwan's defense ministry said today that it detected over a hundred Chinese aircraft and nine warships around the island after the visit. It called the number a recent high. A Biden administration official says talks showed limited early signs that military communications between the two countries could start to be restored. The White House suggested more meetings between the U.S. and China will come over the next few months. China's top diplomat is on the road again. Wang Yi is starting a four-day trip to Russia on Monday. He will meet with Secretary of Council Secretary Nikolai Petrushev and his Russian counterpart Sergei Lavrov. The visit is expected to strengthen political ties between the two nations. Wang is expected to lay the groundwork for Putin's visit to Beijing for the third Belt and Road Forum, following an invitation by regime leader Xi Jinping earlier this year. Also an update from Russia, North Korea's leader Kim Jong-un is heading home after making a final stop at an eastern Russian city. During his week-long visit, Kim pledged to step up military and economic cooperation with President Vladimir Putin, raising concerns from South Korea and the U.S. KCNA has more on Kim's visit. Kim Jong-un left the railway station in Russia's far eastern city of Artyom on Sunday. On his visit, Kim discussed a potential arms deal with President Vladimir Putin, though no official agreement has yet been signed. According to North Korea's state media, the visit aimed to further solidify cooperation between the two countries. Upon his departure, a Russian official gave Kim several military gifts, including five explosive kamikaze drones, a reconnaissance drone and a bulletproof vest. During his trip, Kim visited multiple military, educational as well as cultural facilities, including a Russian fighter jet factory that is under Western sanctions. Meanwhile, South Korea and the United States warned against any weapons trade and other military cooperation between Russia and North Korea. In light of Russia's continued invasion of Ukraine as well as North Korea's nuclear program, it was Kim's first official overseas trip since the COVID pandemic. Kost M&S, NTD News. The United Nations is looking favorably on Taiwan. A top official was asked last week about Taiwan's appeal to be included in the body. Here's a look. Madam DSG, do you believe that Taiwan's exclusion from the UN under the current guidelines hold back implementation of the 2030 goals? I think exclusion of anyone holds back the goals. We said leave no one behind, and I think member states have to find a way to make sure that we are not in that position where we're excluding people. Every person matters, whether it's Taiwan or otherwise, and I think it's really important for member states to find a solution to that. Taiwan has long called on the United Nations to admit it as a member, but under a 1971 UN resolution, only the People's Republic of China is recognized as the legitimate representative of China to the group. A UN deputy spokesperson added that UN sticks to the one China policy. Taiwan has its own government independent of communist China, but Beijing claims it as part of its territory and threatens to take over the island by force if necessary. That's all for today's China In Focus on YouTube. We're now sharing a shortened version of our program here, after being demonetized for two years. Here's what to look out for in our second half. Huawei's bombshell debut. The Chinese tech giant quietly unveiling its first 5G smartphone using China-made chips. Now U.S. lawmakers are calling for tighter export controls. Why? Because Huawei can't access 5G chips or chip-making technology from overseas due to Washington's export restrictions. How did China manage to do it? And what role does politics play in this big announcement? We sat down with John Palsen, author of Wireless Wars and former Chief Convergence Officer for British Telecom, for details. The full episode is available on our partner platform, Epic TV. To sign up, click the link down below. Thanks for watching China In Focus. I'm Tiffany Meyer. See you tomorrow.