Photo by Carl Court/Getty Images China’s President, Xi Jinping, reviewed an honour guard in London in 2015.

LONDON — The Chinese pulled 84% of their overseas property investments globally in the first half of 2017 after the government began officially frowning on a “negative list” of foreign investments that were attracting Chinese cash, according to Morgan Stanley.

The Chinese were 25% of buyers of central London commercial property in 2016, a recent note to clients from Morgan Stanley’s research team said.

The sudden absence of China explains, in part, the recent softness in the London property market. Residential prices in London began falling in the last few months.

The Royal Institute of Chartered Surveyors currently describes the London property market as “stagnant.”

“Over half the investment in the City over the past year has come from Asian investors,” Morgan Stanley said, and only 15% comes from the UK. (“The City” refers only to London’s financial district.)

In total, Chinese investment in foreign property globally was estimated at $US10.6 billion in 2016. Morgan Stanley said it has dropped to $US1.7 billion this year, a decline of 84%, and expects it to stay low next year.

Here is the scale of the cliff:

London and the UK are particularly vulnerable to a pullback of Chinese investment. Last year, Chinese money was 25% of all central London commercial property purchases. Back in 2006, was only 1%. In the City area of London, however, almost all buyers are foreigners, with Asians making half of all purchases:

In the last few weeks, the China Banking Regulatory Commission began cutting off funding for foreign property investments.

Instead, the government wants investors to pour money into projects associated with its One Belt, One Road project to link China with the West via land. It called investments in property, hotels, cinema, media, and sports clubs “irrational,” the Morgan Stanley team reported.

The situation will affect the US and Australia, too:

China was 30% of all Manhattan transactions this year so far. Commercial real estate prices there are down 55% year on year.

In Australia, the “residential sector is most exposed,” Morgan Stanley says. China is 12-25% of commercial real estate transactions down under.

Business Insider Emails & Alerts Site highlights each day to your inbox. Email Address Join

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.