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Chinese stocks are off to their worst start to a year since 2016, as investor confidence continues to decline due to a real estate crisis, slow economic growth, and a crackdown on certain businesses by the Chinese government. Hong Kong’s benchmark Hang Seng Index fell 2.

3% on Monday, reaching its lowest level since October 2022, while the Shanghai Composite Index and the Shenzhen Component Index both experienced significant drops. Foreign investors are reducing their risk exposure to China and have bearish expectations for business conditions in the country.

The Chinese government’s lack of effective measures to resolve the property turmoil and stimulate economic recovery is contributing to the negative sentiment. Investors were further disappointed when China’s central bank announced that it would keep its benchmark lending rate steady, rather than implementing a cut to lower borrowing costs.

The poor performance of Chinese stocks in 2024 follows a difficult year in 2023, when major stock indexes fell by more than 11%. In contrast, US and European benchmark indexes experienced gains in 2023.

The latest demographic data revealing China’s aging and shrinking population has also added to investors’ concerns. Chinese Premier Li Qiang’s recent speech at the World Economic Forum, which did not mention any new stimulus measures, has further dampened investor confidence.

Overall, investors are becoming wary of the risks involved in investing in China, particularly due to the unpredictable and authoritarian financial landscape in the country.