Beijing Restricts Release of Data on Foreign Funds Flowing into China
Beijing has implemented restrictions on the release of daily data concerning overseas funds entering China, as foreign investors continue to steer clear of the country. Starting from August 19, the Shanghai and Shenzhen stock exchanges ceased providing real-time information on foreign funds purchasing Chinese stocks, which is a crucial indicator for investors. Instead, China’s central bank will now release information on financial assets held by overseas entities every quarter.
Under the new regulation issued by the Chinese Communist Party (CCP), only the total transaction amount and number of transactions will be announced after each trading day’s market closure. For “northbound” trades originating from Hong Kong via the Hong Kong Stock Connect to the Shanghai and Shenzhen exchanges, real-time announcements regarding quota balance for that day will only occur when the remaining balance falls below 30 percent.
The restriction means that real-time trading data terms for Shanghai and Shenzhen stock markets are no longer disclosed, cutting off information about foreign funds flowing into China’s A-shares through Hong Kong. In addition to this development, public data reveals that in H1 2024, foreign direct investment (FDI) in China dropped by 29.1 percent compared to last year’s same period. Furthermore, FDI in China totaled $33 billion in 2023—a record low since 1993—representing an 82 percent decrease from 2022.
Paul Chiou, a finance professor at Northeastern University in Boston, stated that Beijing’s move indicates an attempt to conceal China’s dire financial market situation. He emphasized that lack of transparency regarding information and data hinders economic development and investor assessment of China’s economic health.
Economist Davy J. Wong expressed concerns over how these new restrictions would discourage international investment in Chinese markets due to unreliable real-time data availability. Wong also highlighted how restricting real-time data increases market uncertainty and reduces transparency.
Foreign capital outflow from China is influenced by factors such as prospects for investment within the country and its current economic growth forecast. The CCP has been tightening control over political and economic information recently; however it has also emphasized engaging in global trade.
Wong explained that Beijing’s contradictory moves serve its political goal of maintaining regime stability while opening up to foreign-funded enterprises necessary for sustaining it; however there is concern about potential cultural influence affecting CCP control over society.
Chiou pointed out contradictions within CCP’s economic policies resulting from attempts to combine socialism with a free-market economy.