 Lujiazui Financial District in Shanghai. Photographer: Qilai Shen/Bloomberg Remember the kerfuffle back in March when a JPMorgan Chase & Co. report called Chinese Internet companies "uninvestable," triggering a rush out of Chinese stocks. The bank later called it an error, but the tag was a good description of the way a lot of foreign investors were feeling about China last year. That appears to be changing. Foreign investors are again loading up on China's stocks, buying more shares in January alone than they did for the whole of 2022. The numbers tell the story: Offshore buyers added a net 141.2 billion yuan ($20.8 billion) worth of stocks listed in Shanghai and Shenzhen through trading links with Hong Kong last month. That was more than 50% above the previous monthly record, according to Bloomberg-compiled data going back to 2017. The demand meant the CSI 300 Index, a benchmark for mainland stocks, has been on a tear. Sentiment has turned because China's leadership ditched its Covid Zero policy and is attempting to revive the property market. The easing of a government crackdown on big tech is another bit of good news. Wall Street analysts are now tipping GDP growth above 5% this year. And it's all happening fast, according to Becky Liu, head of China macro strategy at Standard Chartered Bank Plc. "Capital inflows have returned to China," says Liu. "The faster than expected reopening and the subsequent faster than expected recovery in economic activities have been the primary driver." The better tone is helped by the Federal Reserve last week slowing its pace of interest rate hikes, which takes upward pressure off the dollar and allows the yuan room to rally. The onshore yuan has gained about 6% since the Covid pivot. This is a big deal in China, as attracting foreign money is a central premise to its economic development. "China's national reality dictates that opening up to the world is a must, not an expediency," noted Vice Premier Liu He last month in Davos, Switzerland. In 2020, China rounded out its inclusion in all three of the top global stock and bond indexes, a moment that was likened to the country's induction into the World Trade Organization in 2001. But after a record gush of inflows, the mood turned dramatically through 2021. A tough regulatory crackdown on tech and real estate wiped trillions of dollars off foreign investors' holdings and then, in 2022, investors starved of yield suddenly had options elsewhere as central banks lifted interest rates by the most in decades. Geopolitical tensions and worries over policy U-turns as President Xi Jinping consolidates his grip on power further spooked investors. A renewed focus by Xi on a so-called common prosperity policy to narrow inequality and grow the middle class is being viewed cautiously by overseas portfolio managers. There are other worries, too: China's population started shrinking in 2022 for the first time in six decades, questioning views about the nation's potential as a long-term engine of growth. Which is why some are warning that the improvement in investor sentiment could wane. "There is still general cautiousness amongst Western investors," says Janet Mui, head of market analysis at RBC Brewin Dolphin. "While they are encouraged by the potential rally this year, most remain cognizant of the medium to long term concerns." Still, money is flowing in again. Bruce Pang, chief economist and head of research for Greater China at Jones Lang LaSalle Inc. says the long list of macro worries around the world, from slowing growth to rising interest rates, make any potential upside from China more attractive. "China's reopening is definitely one of the key investment themes in 2023," he says. —Enda Curran, Bloomberg News, chief Asia economics correspondent | 
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