Our Opinion: 2025
China’s technology boom
China’s stock market is booming, but renewed animal spirits are not yet helping the wider economy. More than $3trn in market capitalisation has been added across mainland and Hong Kong markets this year as investors dive into local AI plays. The rally gained new strength over the summer as the government unveiled measures clamping down on “involution” – fierce price competition that harms corporate profits.
Individual traders are driving the boom. Retail investors account for some 90% of daily trading on onshore Chinese markets. That compares with a 20%-25% retail share in the US, where large institutional money dominates.
Chinese tech had been a sector under siege after regulatory crackdowns. Now it is staging a triumphant comeback, with the Hang Seng Tech index of Hong Kong-listed firms rising 45% this year, a huge outperformance compared with the 18% rise in the US Nasdaq. Alibaba stock has more than doubled this year, with Tencent rising 62%.
The rally began in January this year when DeepSeek’s R1 model showed that China was keeping pace with American AI. Yet beyond the tech boom, the domestic economy remains flaccid and signs of slowing growth in the second half of the year. Return on equity for firms in China’s CSI 300 index has been stagnant for four consecutive quarters.
The CSI 300 has surged 46% since the present rally began in September last year. Chinese officials engineered the boom with interest-rate cuts and promises of fiscal stimulus. Yet consumer confidence remains sluggish. Deflation stalks the land, with consumer prices off 0.4% in the year to August. Factory-gate prices have been falling year on year for 35 months.
Still, the boom does appear to be raising appetites for stocks. Roughly 30 million new share trading accounts have been opened in Shanghai since September 2024. Optimists says a tectonic shift is under way as Chinese households invest their pandemic-era savings. Chinese household deposits have spiked from 80% of GDP to 110% since the pandemic. That makes for an almighty slug of cash waiting to be deployed into equities.
Chinese shares fulfil many of the classic requirements for a good investment. They have been out of favour for a long time. They are cheap. And crucially they now have momentum on their side – the MSCI China index has returned more than twice as much as America’s S&P 500 over the past three months. For all the worries about Trump’s tariffs, around 85% of MSCI China revenues are domestic, with just 3% originating from the US.
28th October 2025
