Veteran Investor Mark Mobius Warns China is an Investor Trap

Mark Mobius, the founder of Mobius Capital Partners, has been a longtime bull on investing in Chinese equities and has done a 180 degrees about-face during an interview with Fox Business on Thursday. It reveals that he can't get his money out of the country.

The billionaire investor and fund manager revealed that he has funds trapped in an account with HSBC in Shanghai. "I can't get my money out. The government is restricting money flow out of the country".

Mobius disclosed that the Chinese government is "putting all kinds of barriers" in his and other investors' way. "They don't say, 'No, you can't get your money out,' but they say, 'Give us all the records from 20 years of how you've made this money,' and so forth. It's crazy."

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Investors who have made a profit Individuals and enterprises attempting to transfer money out of China must adhere to laws and limits imposed by authorities such as the State Administration of Foreign Exchange (SAFE), which oversees China's foreign currency market.Last year, the Chinese government discouraged and barred Chinese individuals from withdrawing money from its banks due to a real estate crisis. As a result, none of the constraints Mobius is currently warning US investors about should come as a surprise.

Direct investment position of the United States in China from 2000 to 2021 totals almost $1.2 Trillion.

On Fox Business, Mobius said his team invested in China through Hong Kong, which Mobius characterized as a "little more open" than China. The city allows overseas investors to invest in both Chinese equities and bonds through local financial institutions. However, with the Chinese government sounding the alert to ready its military preparedness last week, tensions over Taiwan continuing, its real estate market in shambles, and China considering re-arming Russia with munitions and offensive military weapons, all foreign investment is now at risk.

On "Mornings with Maria" Thursday, Mark Mobius pointed out that China's bottom line is moving "in a completely different direction" than its former open-minded-market revolutionary leader Deng Xiaoping.

"Now you have a government taking gold in shares in companies all over China. That means they will try to control all these companies," Mobius explained. "So, I don't think it's a very good picture when you see the government becoming more and more control oriented in the economy."

Mobius' warning about China comes as a recent survey on Chinese business sentiment from the American Chamber of Commerce revealed that most U.S. companies say China is no longer seen as a "top three investment priority."

Investors should take Mobius' warning seriously, says Michael London, the co-editor of World Opportunity Investor. The real estate, banking crises, and Covid-19 crises, and U.S. sanctions imposed by former President Trump continue to weigh down the Chinese economy. The government just established a 5% growth objective, the lowest annual growth rate aim in decades. However, China's GDP increased by just 3% last year. Despite China's "great re-opening," many analysts globally expect barely 3.5% growth in 2023.

According to the May 2021 numbers given by the US Treasury, China holds an estimated $1.1 trillion in US Treasuries and is the second biggest investor among foreign governments. 1 This amounts to more than 15% of US debt held abroad and around 3.6% of overall US debt.

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China's government may be looking to preserve liquidity by putting barriers in place to prevent investors from withdrawing their investments in the country, but it may also be anticipating a more serious confrontation with the US and its allies that freezes its and its investors' funds overseas, even if it was "an even Steven offset, an economic confrontation over supplying Russia with military hardware for its continued invasion of Ukraine or it's deciding to launch an attack o This black swan catastrophe would make the 2008/09 financial crisis appear like a minor inconvenience.

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