Chinese investors are turning away from traditional investments in their droves, yet are struggling to find alternative ways to deploy their capital.
A Bloomberg report has chronicled the hesitation of Chinese investors to invest in the stock market, which historically has been the destination for the rich to hedge their wealth and earn decent returns.
“No matter if you’re high net-worth or not that rich, the golden time of parking your money and letting your wealth grow, it’s gone,” said Wei He, a senior economist at Gavekal Research Ltd in Beijing.
Chinese shunning real estate
But it is not just stock markets being shunned by Chinese investors, real estate is now considered a red flag and falling prices since Q3 of 2021 has only deepened mistrust of the markets.
On the other hand, mutual funds have suffered the same fate as other investment options in the country with the Chinese equities in a bear market.
For many investors, the only alternative is to deposit their funds in bank saving accounts despite the low-interest rates offered.
“What I can do this year is to lie flat, and put my savings into big banks,” said one disgruntled investor. “No matter how low the deposit rates will be, it is safe at least.
While letting cash sit in bank vaults might not be seen as the most investment-savvy move, for several citizens it is the safest as the Chinese economy is still reeling from the effects of the pandemic and the falling tech stock prices.
Over a trillion dollars was erased from the tech sector while the Evergrande crisis put the final nail in the coffin for real estate investors.
Crypto to the rescue? Or not?
Amid falling trust in legacy markets, investors should have turned to other choices like cryptocurrencies. However, the Chinese government outlawed the asset class in the purge of 2021 causing an exodus of local and foreign crypto platforms.
China has always been a global powerhouse in cryptocurrencies with billions flowing into the ecosystem before the wide crackdown. There are reports that investors are still in the space, making a killing in decentralized finance (DeFi) but they were around long before the crackdown.
For new entrants in the space, DeFi might appear daunting and the paucity of options might mean that keeping their money in the bank is their best bet after all.