More investors are joining the growing number to flee China as the Communist Party’s control tightens over the economy.
Key Details
- Following the Chinese Communist Party’s recent congressional meeting, more investors have joined the throng already exiting the country.
- The yuan is continuing to weaken as Hong Kong-listed stocks reach their lowest point in the last decade.
- Investors have also pulled out of the Shenzhen and Shanghai markets.
- This flight of investors is in part due to the increasing government control exercised by the country.
Why it’s news
Recent U.S. policies have encouraged companies to leave China, adding to the country’s woes. Supply chain disruption has caused many others to reconsider where their manufacturing takes place, threatening China’s current hold on manufacturing.
Between tariffs, COVID restrictions, and unsteady international relations, businesses are reconsidering manufacturing relationships with China.
U.S. and Chinese trade relations have been tense during the last several years. Tariffs put in place during the Trump administration, sanctions on Chinese tech manufacturers, and some direction from the Biden administration have indicated a trend against U.S. and Chinese trade.
The Chips and Science Act and the Inflation Reduction Act, two recent pieces of legislation, aim to bolster U.S. technology development, but at the same time, they push companies away from China. To access the $52.7 billion in federal funding, companies must drastically reduce chip production in China and countries of concern, like Russia.
Moving established manufacturing facilities and reworking current supply chains is a monumental task. Apple, for example, will take an estimated eight years to move just 10% of its production out of China, Bloomberg reports. Smartphone production in particular is difficult to relocate as China makes up 70% of global smartphone production.
