Taipei, Taiwan – Like many Hong Kongers, accountant Edelweiss Lam spent last week watching the city’s stock market wipe out 14 months of gains as the Hang Seng Index fell below the psychological threshold of 15,000 points.

It wasn’t the first time Lam, who has been investing in Hong Kong stocks since the late 1990s, experienced this.

The index fell below 15,000 points during SARS in 2003, the global financial crisis in 2008 and the zero-COVID lockdowns in 2022.

But while ebbs and flows are part of the investment game, Lam felt different this time as he watched the key indicator of the Hong Kong stock market’s plunge fall “back to square one.”

“It seems I can’t see the future,” Lam told Al Jazeera by phone from Hong Kong.

The reason, Lam said, is China.

As Beijing expands its control over all aspects of life in Hong Kong, including the economy, and gloom remains over the state of China’s post-pandemic recovery, investors have voted with their money and looked to other markets.

More than a quarter of a century after Hong Kong was returned to China, Hang Seng is more or less back to where it was in its final days as a British colony.

On Friday the index was below 16,100 points, lower than on July 1, 1997, the day of the handover.

During the same period, stocks in the United States, Japan and other popular markets rallied.

Investors’ money in the SP500, the most popular measure of U.S. market performance, has increased nearly tenfold since 1997.

“When the Chinese government announces new regulations or control of an industry, the market can fluctuate a lot,” said Lam, whose investment portfolio includes blue-chip stocks, fixed-term deposits and real estate.

“The relationship between Hong Kong and China is getting closer and closer, the control is tighter, so we can’t ignore what they are doing in China.”

Hong Kong has been at the forefront of China’s crackdowns in recent years, from imposing a draconian national security law on the city to tightening regulation of corporate giants like Alibaba and Tencent to crackdowns on foreign companies in mainland China.

Many of China’s largest companies are dual-listed in Hong Kong and China and, along with Chinese banks and other technology companies, make up a large portion of the Hang Seng Index.

At the same time, China’s economy struggled to recover from the impact of COVID-19 and Beijing’s strict pandemic restrictions, amid pressing structural issues such as a shrinking population, high local government debt and a sluggish housing crisis.

Gross domestic product officially grew by 5.2 percent in 2023 – the weakest development in decades if the pandemic is excluded.

Despite Beijing’s insistence that China is open for business, foreign investor confidence is waning.

Last year, China recorded its first decline in foreign direct investment in 12 years, with inflows falling 8 percent to $157.1 billion.

“If we look at the overall business sentiment for both the financial sector and the broader economy, first of all, the economic fundamentals in both Hong Kong and China are not particularly good at the moment,” said Chim Lee, a China analyst at Economist Intelligence Unit, Al Jazeera said.

Lee said it was “not particularly impressive” that China met its economic growth target last year as Beijing set a relatively weak target.

Analysts estimate that around $6 trillion – equivalent to more than a quarter of total US economic output – has been wiped out by stock markets in China and Hong Kong since the start of 2021.

China’s CSI 300 index, which measures the 300 largest companies on the Shanghai and Shenzhen stock exchanges, has fallen more than 40 percent over the past three years, while the Hang Seng has fallen 50 percent over the same period, according to Bloomberg data.

Instead, investors are flocking to other markets such as Japan and the US, where analysts are predicting a bullish 2024.

The Nikkei 255 Index, an index of top companies on the Tokyo Stock Exchange, posted highs last week not seen in more than 30 years, while the S&P 500 in New York closed at an all-time high for the sixth straight day on Thursday.

“[Hong Kong’s] The economic situation may now be just a major rounding error in China’s GDP, but it still plays an important role in financial and capital market transactions for and with the mainland. Therefore, it is natural that the pessimistic sentiment and poor share price valuations are rampant in China [Hong Kong] also,” George Magnus, a fellow at the China Center at Oxford University and a research fellow at SOAS in London, told Al Jazeera.

Hong Kong’s declining rights and freedoms – which were supposed to be guaranteed until 2047 under a deal called “One Country, Two Systems” – have further fueled the crisis of confidence.

Since the passage of the national security law in 2020, the city’s political opposition and independent media have been nearly wiped out and hundreds of people have been arrested for nonviolent crimes related to activism and speech.

Hundreds of thousands of Hong Kongers have left the city with their money amid Beijing’s tightening control.

Lam said she decided to move her pension fund overseas last year and plans to sell her remaining stock investments in Hong Kong at a loss.

“They say they want to do something, but we don’t see any real action,” Lam said of the government’s economic policies.

In October, Hong Kong cut stamp duty on property sales and share transfers, but consumption and tourism have not yet recovered to pre-pandemic levels.

Analysts say reviving Hong Kong and China’s economies will require much bolder measures.

Beijing is considering a possible $278 billion stock market rescue plan, Bloomberg reported this week, citing sources familiar with the matter. However, many analysts argue that broader structural reforms are needed to restore investor confidence.

A similar rescue plan implemented after the Chinese stock market crashed in 2015 had mixed results – although the government acted quickly and the overall economy was on stronger footing.

Memories of that rescue plan and concerns that Beijing will not undertake difficult but necessary reforms are one reason the rescue plan has received a muted response, said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis.

“Here it’s really the market saying: I’m sorry you’re not growing. I don’t trust your numbers; Their future looks bleak – which wasn’t the case in 2015. It was perceived as a temporary shock, so I think that is the difference first of all,” Garcia Herrero told Al Jazeera.

Due to its high level of debt and limited options for easing monetary policy, Beijing probably has less room for maneuver this time.

“They used so many bullets that the credibility of the next bullet is less,” she said.