What’s going on here?
China’s onshore stock market has raced ahead this year, with the Shanghai Composite and CSI 300 outperforming both the S&P 500 and Hong Kong’s Hang Seng Index – marking their strongest run since July.
What does this mean?
Most of the momentum is coming from a tight group of sectors, mainly technology and electronics. Homegrown names like Cambricon Technologies – often called China’s Nvidia – have soared nearly 500%, and robotics firm Shenzhen Inovance is up over 80%. These gains have been driven by domestic investors shifting money out of property and low-yield savings, as real estate slumps and banks cut deposit rates. Insurers are joining in too, thanks to recent policy tweaks, though they still keep most assets elsewhere. But there are some big signals this rally may be running hot: margin borrowing is above pre-crash 2015 levels, and valuations in hot sectors are starting to look stretched compared to profit forecasts. While government efforts to boost demand and manage risk are in play, they haven’t eased bigger concerns over how long this run can hold.
Why should I care?
For markets: Momentum meets a reality check.
Investor excitement and government support have fueled China’s latest rally, but fragile fundamentals lurk underneath. With households and insurers still underweight in stocks, there’s room for more money to flow in – but concentrated bets, higher leverage, and uncertain company earnings make the market vulnerable to shocks. Regulators are watching closely, and if volatility spikes, state-backed players could step in to steady things.
The bigger picture: China’s economic strategy faces a big test.
Whether China’s bull market can keep going comes down to the wider economy, not just headline stock gains. Persistent property troubles, trade hurdles, and rising unemployment are holding back demand and company profits. Beijing’s stimulus has been strong, but it hasn’t sparked broad recovery just yet, pushing policymakers to revisit their playbook. For now, the tug-of-war between lively equities and sluggish fundamentals could shape China’s financial story for the rest of the year.
