Years of harrowing losses have left Chinese stocks with a diminished standing in global portfolios, a trend that’s likely to accelerate as some of the world’s biggest funds distance themselves from the risk-ridden market.

An analysis of filings by 14 U.S. pension funds with investments in Chinese stocks show most of them have reduced their holdings since 2020. The California Public Employees’ Retirement System and New York State Common Retirement Fund, among the nation’s biggest pension investors, cut their exposure for a third straight year.

What started out as a performance-driven exodus now risks becoming a structural shift due to a toxic combination of doubts over Beijing’s long-term economic agenda, a prolonged property crisis and strategic competition with the U.S. Money managers at some of the biggest pensions in the U.S. and Australia said in interviews that the prevailing playbook for China is one of caution.