Western financial firms are scaling back their operations in China as the country’s economy continues to struggle. According to Reuters, Fidelity International, Morgan Stanley, and Legal & General have either suspended expansion plans or cut jobs focused on the region since the beginning of the year. Goldman Sachs, JPMorgan Chase, and Citigroup have also cut investment banking jobs focused on China in the last year.
China’s economy failed to pick up steam in 2023, growing only 5.2% for the year, lower than the 6% rate that was normal prior to 2020. The effects of years-long COVID-19 lockdown policies are still taking their toll.
Amid poor projections of future economic growth, foreign investors withdrew billions from China and Hong Kong in 2023. The Institute of Internal Finance estimated at the end of last year that around $65 billion would exit the Chinese financial system in 2024.
While financial firms are limiting their operations in the country in the short term, most are not pulling out completely in hopes that China will be able to economically recover, according to Reuters. However, more companies are expected to shrink operations in the country as poor earnings and a lack of deals continue to weigh on profits.
The People’s Bank of China has implemented measures to boost the country’s struggling economy, including facilitating credit to struggling sectors, lowering interest rates, and loosening capital requirements for banks. However, the amount of money for both onshore and offshore initial public offerings for Chinese companies has dropped 80% in the first quarter year-over-year. In that same time, the value of merger and acquisition deals involving China dropped by 36%.
Adding to China’s economic woes is a slump in the country’s real estate market, which continued its downward spiral in March with home values dropping 2.7% year-over-year.
