China’s Stock Market Skyrockets: Boom or Bubble?

While China’s macroeconomic indicators continue to struggle for stability, the country’s stock market has exploded with astonishing strength.

This “vertical rally” is prompting a critical question among global investors:
Is this the dawn of a new era — or simply a bubble inflated by pure expectations?

1. The Numbers Speak: A Spectacular Show on China’s Stock Market

There’s no denying it — 2024 has been a phenomenal year for Chinese equities.

The CSI 300 Index, the benchmark for A-shares, has surged roughly 16% since the start of the year, nearing its highest level in over three years.

The CSI 300 Information Technology Index has outperformed even further, hitting its strongest level since 2015.

According to Goldman Sachs, the combined market capitalization of Chinese and Hong Kong-listed stocks has expanded by over USD 3 trillion this year alone.

This rally has been underpinned by three main pillars:
the nation’s rapid advances in Artificial Intelligence (AI),
its push for semiconductor self-sufficiency,
and the government’s “anti-price war” campaign to protect corporate profit margins.

2. The True Driving Force: Retail Investors and Massive Household Savings

What makes this rally unique is that it’s not led by institutional funds —
but rather by a powerful army of retail investors.

According to HSBC, individual traders account for up to 90% of daily turnover in China’s onshore market — a striking contrast to global exchanges such as the NYSE, where the figure ranges between 20–25%.

Raymond Cheng, Chief Investment Officer for North Asia at Standard Chartered, observed:

“China’s stock rally appears detached from underlying economic fundamentals,”
while highlighting that retail investors are increasingly shifting deposits from banks into equities.

Fueling this momentum is a record household savings pool exceeding RMB 160 trillion (USD 22 trillion).
With only 5% currently allocated to stocks, coupled with falling deposit rates and a weakened property market, this vast liquidity reservoir could continue to propel the market upward.

3. The Hidden Reality: An Economy Still Struggling Beneath the Surface

Despite the market’s exuberance, the broader economic backdrop remains mixed.

Recent indicators paint a more subdued picture:

Industrial production in August grew 5.2%, the slowest pace since August 2024.

Retail sales rose 3.4% year-on-year, below analysts’ expectations of 3.9% and slower than July’s figures.

Japan’s Nomura Holdings has cautioned that excessive leverage and speculative activity could inflate a potential bubble, particularly as equity markets soar while macro data signals a loss of momentum heading into the year’s second half.

4. Expert Insight: “Not a Bubble Yet, But Heading That Way”

Market experts remain cautious about the sustainability of this rally.

Hao Hong, Managing Partner and CIO at Lotus Asset Management, noted:

“This isn’t a bubble yet, but it’s certainly moving in that direction.”
He identified biotech and technology research stocks as the most vulnerable segments.

Meanwhile, Chaoping Zhu, Global Market Strategist at J.P. Morgan Asset Management, offered a glimmer of optimism:

“Mid-year earnings reports show signs of stabilization across AI, semiconductor, and renewable energy sectors.”
However, he warned that tech valuations may have already priced in overly optimistic expectations, leaving the market exposed to a correction before earnings catch up.

Conclusion: Boom or Bubble?

China’s stock market stands at a critical crossroads.
On one hand lies the power of reform-driven optimism, massive idle savings, and strategic investment flows into technology sectors.
On the other, a slowing economy and fragile domestic demand continue to cast long shadows.

Ultimately, the answer to the question — “Boom or Bubble?” — will depend on how quickly Chinese companies can turn expectations into tangible earnings,
and whether Beijing can deliver a broad-based and sustainable recovery in the months ahead.