Foreign investors have pulled a record £12bn out of China in an economic blow for President Xi Jinping.

Fears over the future of the world’s second largest economy meant foreign investors withdrew $14.8bn (£11.6bn) between April and June, data from the State Administration of Foreign Exchange shows.

It was only the second time more foreign money has been withdrawn from China than invested since records began in 1998, and was a massive swing from the net $10bn pumped into the country during the first three months of the year.

It came as the Saudi-led Organisation for Petroleum Exporting Countries (Opec) cut its forecast for oil demand growth, citing concerns over the Chinese economy.

Geopolitical tensions, an ailing domestic economy, a slump in the value of the renminbi and low interest rates have all become major deterrents to the market, economists warned, amid a race to sell assets and divert profits overseas.

Foreign direct investment in China last turned negative in the autumn of 2023, when investors pulled out $12bn. Chinese companies also invested a record $71bn overseas between April and June, up 80pc year on year. 

Combined, this meant China suffered a record net outflow of $86bn in direct investment. 

Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said: “I think what is going on is that foreign investors are selling assets and exiting China or pulling profits out of China.”

Western businesses exporting to the US have been “nearshoring” production to friendlier states such as Vietnam and Mexico in order to reduce risks to their supply chains.

Mr Wrigley said: “Companies who have got export factories are worried about geopolitical tensions with the US.”

On top of this, domestic consumer demand in China has been anaemic since the country reopened after lockdown, as the nation’s property crisis has eroded people’s wealth and hit confidence.

Mr Wrigley said: “Consumers generally have been downgrading their purchases by buying cheaper stuff. 

“There has been a limited return of spending in some areas like tourism and there is just not as much appetite for buying big items as before.”