Pre-Pandemic Era:
China once dominated emerging market (EM) capital flows, drawing massive foreign investment at the expense of other EM economies.
The Turning Point:
Russia’s 2022 invasion of Ukraine triggered a sudden stop in foreign money entering China — a shift that has proven structural, not temporary. Investors, burned by geopolitical fallout, are now avoiding similar risks with China-Taiwan tensions.
The New Trend:
Since 2022, capital has flooded into non-China EM — 24 countries across Latin America, Eastern Europe, the Middle East, Africa, and Asia — while flows into China have stagnated.
Recent Data:
Even the Q3 ’25 U.S.-China rare earths tensions only deepened the outflow from China, reinforcing the decoupling trend.
Why It Matters:
Markets have lost patience with China’s military posturing over Taiwan. What began as a cautious pivot is now a lasting investor realignment — away from China, toward the rest of the emerging world.
Key Takeaways to Highlight:
🚨 Structural shift in EM investing, not a temporary pullback.
📉 China’s capital inflows have flatlined since Ukraine war.
📈 Record inflows into non-China EM — broad-based and sustained.
⚠️ Geopolitical risk (Taiwan tensions) is now a decisive factor for investors.
🔁 Permanent decoupling likely, as confidence in China’s stability erodes.
