Global Capital Is on the Move: Out of China, Into India, and Away From U.S. Treasurys

Global Capital Is on the Move: Out of China, Into India, and Away From U.S. Treasurys

Money doesn't sit still, and a lot of it is moving in directions that matter for understanding who's willing to lend the United States cash.

Start with China. Fidelity International, which manages $1.18 trillion in assets, is reportedly planning to exit its China retail fund business, according to Reuters. The firm launched a wholly-owned Shanghai subsidiary in 2023 hoping to eventually manage more than $14 billion. It got to roughly $670 million, less than 5% of that target, according to an internal Fidelity document Reuters reviewed. Reuters attributed the pullback to fierce local competition, frequent leadership turnover, and a chronic inability to build scale.

Fidelity isn't alone. Vanguard closed its Shanghai office in 2023. Legal & General scrapped plans for a China business license in 2024 and cut its Shanghai footprint by about 80%, according to the Epoch Times. Schroders has also been retreating. This follows a 2019 push by Beijing to let foreign managers set up wholly-owned China funds for the first time, part of a trade deal aimed at giving Western firms a shot at China's $12.8 trillion pool of household savings, the Epoch Times reported. BlackRock and Neuberger Berman got in early and did well initially: BlackRock reportedly raised $1 billion in its fund's first week in 2021. But the newer, "greenfield" funds launched by firms like Fidelity and Schroders never came close to that success.

India Is Catching the Money China Is Losing

While Western fund managers back out of China, they're piling into India. Foreign Portfolio Investors pumped more than ₹42,000 crore into Indian equities in July 2026, one of the largest monthly inflows in recent years, according to a market analysis published by IMI Finance Club. The Economic Times reports that FPIs kept adding to those bets selectively through August, though with a notably different pattern than the July surge. Buying has become more targeted rather than broad-based.

The case for India is straightforward: steady GDP growth, manufacturing incentives like the Production Linked Incentive scheme, and relatively controlled inflation, according to the IMI Finance Club analysis. There's also a global rotation story here. As inflation cools in developed markets and central banks are expected to cut rates, government bonds pay less, and fund managers go hunting for yield elsewhere. India, for now, is winning that hunt.

None of this means China's economy is collapsing or that India's rise is guaranteed to last. Fund flows chase sentiment as much as fundamentals, and sentiment can reverse fast. The Economic Times flags a puzzle: despite the FCNR (B) deposit scheme pulling in $65 billion, the rupee still isn't strengthening the way you'd expect if foreign capital were flooding in.

Washington Has a Bigger Problem

The more consequential shift is happening in U.S. government debt. Axios reports that foreign governments are becoming far less willing to finance American budget deficits than they used to be. That retreat isn't new. It started gathering steam back in 2016 when China began selling off its Treasury holdings to defend its own currency, according to Axios.

Foreign government holdings of Treasurys have stayed roughly stable in dollar terms, just under $4 trillion, Axios notes. But that stability masks a changing cast of buyers. As foreign governments step back, hedge funds and other private traders are filling the gap. Axios points out those buyers have little in common with the safety-focused reserve managers who used to dominate the market. They're not parking cash for safekeeping. They're trading, and they're far more sensitive to risk.

That distinction matters because it showed up in real time. After a sharp selloff in long-term U.S. debt, the Treasury Department announced Wednesday it would increase buybacks of that debt, according to Axios. The move stabilized the bond market and lowered yields that day, but analysts told Axios it could create other risks down the line. Axios frames this as likely not the last such skirmish between the Trump administration and a bond market that's grown jumpier and more attuned to risk than it was a few years ago.

A Fourth Front: Sanctions Pressure on Iran

Separately, the Trump administration has been ramping up financial pressure on Iran. Iran's currency, the rial, hit a record low of over 2.02 million to the dollar, Breitbart reported, as the administration rolled out what Treasury Secretary Scott Bessent called "Economic D-Day" sanctions. Bessent wrote in a Financial Times op-ed that Iran's economy has been "decimated" and predicted the sanctions would trigger an "endgame" in the region. Iran's central bank director, Abdolnaser Hemmati, pushed back, describing the rial's recent slide as "temporary" and blaming it on comments from the Trump administration rattling investors.

What Ties It Together, and What Doesn't

These aren't the same story, and treating them as one trend would be sloppy. Fidelity's China exit is about a failed business model in a market with fierce domestic competition. India's inflow surge is about growth prospects and global rate expectations. The Treasury shift is about foreign governments recalculating the value of parking reserves in U.S. debt as America's deficits keep climbing. The Iran sanctions are U.S. policy, not a market-driven retreat.

What connects them is a broader picture: global capital is getting pickier, and the United States is not exempt from that scrutiny. A report from UN Trade and Development's World Investment Report 2026 found that global FDI actually grew about 6% in 2025 to $1.6 trillion, with developed economies gaining around 11%. That's real growth, not a global pullback story. But it also shows capital concentrating hard. The top 20 host economies took more than 80% of it, according to the UNCTAD report cited in an aabdcegypt analysis. The money isn't fleeing. It's getting more selective about where it goes, and Washington's ballooning deficits make the U.S. Treasury market a harder sell than it used to be to the government buyers who once treated it as a safe parking lot, not an investment to second-guess.