Executive Summary
- China’s A-share market has surged by 52% over the past year, reaching a total market value of 104 trillion yuan ($14.6 trillion), attributed to Beijing’s concerted efforts to bolster the economy.
- The stock market rally is a result of policy interventions by financial regulators and is a key part of President Xi Jinping’s economic strategy to offer an alternative for household savings and stimulate consumer spending.
- Despite the stock market’s success, China’s property sector continues to face significant challenges, with property investment declining and major developers struggling, indicating an incomplete economic recovery.
The Story So Far
- China’s recent stock market rally is a direct result of Beijing’s concerted policy interventions, initiated a year ago, aimed at bolstering the economy and revitalizing a previously “uninvestable” market. This strategic shift aligns with President Xi Jinping’s broader economic goals to provide a robust alternative for household savings and stimulate consumer spending, especially given the persistent and severe slump in the property sector, which has traditionally been a primary investment avenue.
Why This Matters
- China’s significant A-share market rally, driven by Beijing’s policy interventions, marks a strategic achievement for President Xi Jinping’s economic agenda, aiming to offer households an alternative to the struggling property sector and potentially stimulate consumer spending while aiding financially challenged local governments. However, the persistent slump in the real estate market indicates that China’s broader economic recovery remains incomplete and faces ongoing, complex challenges.
Who Thinks What?
- Beijing and President Xi Jinping’s administration view the stock market rally as a successful outcome of concerted policy efforts, offering a viable alternative for household savings and a critical component for boosting consumer confidence and aiding local governments.
- Goldman Sachs analysts observe a more solid foundation for a “slow bull” market, citing a 6% average growth in corporate earnings and continued improvements.
- Economic analysts suggest that while the creation of a strong stock market is a significant achievement, it represents only the initial phase in reinvigorating China’s economy, with persistent challenges in the real estate sector indicating an incomplete recovery.
China’s domestic A-share market has experienced a significant rally over the past year, with its total market value surging by 52%, a development attributed to Beijing’s concerted efforts to bolster the economy. This resurgence, which has seen the market value grow to 104 trillion yuan ($14.6 trillion) from 68 trillion yuan, aligns with President Xi Jinping’s broader economic goals to offer alternatives for household savings and potentially stimulate consumer spending, though the persistent slump in the property sector indicates an incomplete recovery.
Beijing’s Policy Impact
The rally follows a series of policy interventions introduced by financial regulators exactly one year prior, aimed at revitalizing a stock market previously considered “uninvestable” by many foreign money managers. State-run media outlets recently highlighted these achievements, noting that shares of over 1,500 companies listed in Shanghai or Shenzhen have doubled since then.
Beyond regulatory actions, other factors have contributed to the improved market sentiment. Breakthroughs in artificial intelligence, such as those by DeepSeek, have played a role. Goldman Sachs analysts also report a 6% average growth in corporate earnings for the first half of the year, with continued improvements suggesting a more solid foundation for a “slow bull” market.
The market’s journey has not been without volatility; after the initial regulatory announcement on September 24 last year, Chinese stocks surged more than 25% in less than two weeks, only to quickly surrender half of those gains. However, the subsequent rebound points to a more sustained positive trajectory.
Strategic Economic Shift
A robust stock market is a critical component of President Xi Jinping’s economic strategy, offering a viable alternative to the property sector for household savings. This shift is intended to boost consumer confidence and spending, which in turn can aid local governments. These authorities, whose holdings accounted for nearly half of the Chinese equities’ market value by the end of last year, are grappling with dire finances, including over $1 trillion in unpaid bills, with Beijing reportedly planning credit extensions from policy banks and state lenders.
Persistent Property Challenges
Despite the success in the stock market, efforts by President Xi Jinping’s administration to reinflate real-estate prices have faced significant hurdles. Property investment continues to decline, slumping another 12.9% year-on-year in the January-to-August period. Major developers like China Vanke, one of the few to avoid default, are reportedly in discussions with creditors to reduce interest payments, underscoring the ongoing distress in the sector.
Economic Outlook
While the creation of a strong stock market marks a significant achievement in Beijing’s economic agenda, analysts suggest it represents only the initial phase in reinvigorating China’s $19 trillion economy. The persistent challenges in the real estate sector highlight the complex and multi-faceted nature of China’s economic rebalancing efforts.
