Chinese stocks have entered a bear market, even as the global artificial intelligence boom supports the country’s economy. Key indexes have fallen more than 20% since peaking in June.
Beijing responded last week by putting $19 billion into exchange-traded funds, according to Bloomberg data. It was the largest intervention since early 2025, when US tariffs shook global markets.
Analysts say these steps may do little to stop the slide. They point to weak consumer spending and worries that the AI bubble could burst.
AI and Chip Stocks Lead the Decline
China’s tech leaders have not escaped the selloff. Shanghai’s STAR50 index, made up of homegrown AI and chip companies, has dropped more than 40% since its June peak.
Shares in Unitree, the world’s largest humanoid robot maker by sales, have halved. The stock had jumped 600% in its Shanghai debut in August.
Memory chipmaker CXMT has also lost ground. Its valuation has fallen by nearly 30% since its August peak, after it became Shanghai’s top weighted stock three months after listing.
“The selloff reflects a repricing of crowded AI trades, weak domestic demand, and the lack of stimulus,” said Gary Ng, senior economist for Asia Pacific at Natixis Corporate and Investment Bank.
The losses have spread to Hong Kong. The Hang Seng index has fallen more than 12% this year, and Chinese stocks rank with Indonesia and India among the region’s worst performers.
Ng said Hong Kong faces pressure from its exposure to Chinese companies and selling by mainland investors. He added that tighter scrutiny of cross-border investment and offshore tax rules also played a role.
Weak Consumer Demand Weighs on Markets
Lorraine Tan, director of equity research in Asia at Morningstar, said market support measures tend to be short-lived without policies that fix deeper problems. She pointed to excess capacity in many sectors and a lack of fiscal spending this year.
Experts said the selloff is unlikely to spread widely to global markets. Strict capital controls limit how much foreign investors take part in Chinese markets.
Demand for AI chips and hardware has boosted Chinese exports this year. That helped the economy beat third-quarter growth expectations.
Still, domestic spending remains weak, and a long housing downturn continues. About 70% of Chinese household wealth is tied to property, which began to slump five years ago.
Some savings moved into stocks as a result. But Beijing has tightened limits on offshore trading in recent months, leaving retail investors with fewer options.
“Chinese equities have generally underperformed most markets this year, and this could contribute to a negative wealth effect that further softens household confidence,” said Lynn Song, chief economist for Greater China at ING.
At a financial forum in Beijing last week, Wu Qing, chairman of the country’s market regulator, promised to “do everything possible to maintain the safety and stability of the capital market.” He also said the regulator would encourage listed companies to increase share buybacks.
On Thursday, China’s benchmark CSI 300 index, which tracks stocks listed in Shanghai and Shenzhen, closed down 1%.
