Chinese investors are increasingly turning to offshore dollar deposits and Hong Kong insurance as confidence in the domestic economy wanes and the yuan weakens, Reuters reports.
Offshore Rush
Individuals are driving this surge, reflecting deep-seated concerns about China’s economy as its anticipated pandemic recovery stalls. The outflows could exert further pressure on the yuan, which is currently at eight-month lows.
Insurance Appeal
Hong Kong insurance has long been a channel for Chinese buying assets abroad, offering more protection than what’s available on the mainland. Insurers such as AIA Group, Prudential, and Manulife have all reported a jump in business from mainland investors.
Economic Concerns
China’s sudden shift from a zero-tolerance COVID-19 policy to living with the virus has unsettled many, leading to pessimism about the economy. The burst of insurance buying in Hong Kong reflects a gloomy domestic outlook and worries about an uncertain future.
Yuan Fragility
The rush to Hong Kong insurance comes as the yuan appears increasingly fragile. A similar, larger outflow in 2016 led Beijing to tighten capital controls and curtail insurance buying. If the current rush continues, it could risk prompting similar policy tightening from Beijing.
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