China's stock market reels from record stretch of capital exodus

A Chinese flag flying over Shanghai.

Liu Liqun/Getty Images

• International investors pulled almost $11 billion from Chinese stocks over the 13 days through Wednesday.
• That's the longest stretch of outflows in data going back to 2016, according to Bloomberg.
• A deepening economic slump and mounting real-estate stress in China have spooked global investors.

China's stock market is reeling from the longest stretch of capital outflows on record, as the deepening slowdown in the world's No. 2 economy spooks international investors.

Almost $11 billion was pulled from the Asian nation's equities over the 13 trading days through Wednesday, according to Bloomberg.

Kweichow Moutai Co., China's No. 1 maker of alcoholic beverages, saw the heaviest selling, with foreigner investors dumping $851 million worth of the stock from August 7 through August 18, according to the outlet. 

The CSI 300 Index of Chinese shares hit a nine-month low this week, taking its declines from a February high to about 13%, amid investor discontent with a slew of unfavourable economic data and a perceived lack of government intervention to support struggling sectors, such as housing. 

Since the pandemic, the Chinese economy has significantly underperformed, and its troubles have ballooned to such an extent in recent months that US President Joe Biden last week likened it to a "ticking time bomb."

A key issue that has hurt investor sentiment toward China is the country's ailing real-estate industry. 

China's enormous property sector accounts for about 30% of the country's overall output. Headwinds faced by the sector include heavy debt burdens and sluggish demand for new properties. This was a contributing factor in stunting the nation's second-quarter GDP growth, which came in at 6.3%, well below forecasts of up to 7.1%.

Despite the Chinese government's pledge to support the struggling sector, no concrete intervention has yet been announced, and any rescue efforts could arrive too late for its heavily-indebted developers – such as Country Garden, which is running out of time to pay its overdue bonds. 

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