After the COVID-19 pandemic, the Chinese economy has faced significant challenges. However, it is important to acknowledge that China’s economic growth was previously on a remarkable trajectory in the Asian region. With sustained double-digit growth for several years, China emerged as the world’s second-largest economy. As a result of this growth, Chinese capital is now flowing beyond its own borders. Here are some key reasons behind this outward movement of Chinese capital:
Real Estate
The recent collapse of Evergrande, the largest real estate company, has had a significant impact on the Chinese property market. The failure of their infrastructure project has left many Chinese citizens without access to homes in a timely manner. As a result, numerous foreign investors have been divesting from the Chinese real estate sector, causing a substantial outflow of funds.
Governance
The Chinese government’s approach to managing big giant businesses like Alibaba Group, Tesla, Facebook, and others may inadvertently discourage other companies from investing in China. This lack of government cooperation creates a sense of unease among potential investors, triggering a panic button of sorts.
Manufacturing Sector
China has emerged as the world’s second-largest economy, following the United States, with a remarkable and sustainable two-digit economic growth. However, the rising labor costs in China compared to other developing economies have become a concern. This has led to a decrease in interest among individuals to work in the manufacturing sector due to relatively lower salaries.
China Debt
Many countries, including Sri Lanka and other Central Asian countries like Kazakhstan, have come to understand the hidden policy behind China’s high investments. However, when countries like Sri Lanka fail to repay their debts to China, China takes over their natural resources, mines, or ports for a duration of 99 years.
Conclusion
In conclusion, the COVID-19 pandemic has presented considerable challenges for the Chinese economy. However, it is crucial to remember that prior to the pandemic, China’s economic growth was exceptional, positioning it as the world’s second-largest economy. This substantial growth has led to the outward movement of Chinese capital beyond its borders. One key factor contributing to this trend is the recent collapse of Evergrande, the largest real estate company in China. The repercussions of this collapse have created a significant impact on the Chinese property market, resulting in foreign investors divesting from the sector and causing a substantial outflow of funds. As the Chinese economy navigates these challenges, it will be essential for effective governance and measures to address the issues in the real estate sector to stabilize and regain investor confidence.