China’s Tech Stocks Enter Bear Market Despite $19 Billion State Support
China's key stock indexes have fallen more than 20% since a June peak, and Beijing's $19 billion rescue of exchange-traded funds has done little to stop the…
The global AI boom has propped up China's economy this year, but it has not saved its stock market. In this week's tech news, key Chinese indexes have fallen more than 20% since peaking in June, crossing the threshold for a bear market.
Beijing stepped in last week, putting $19 billion into exchange-traded funds. It was the government's biggest intervention since early 2025, when US President Donald Trump's tariff offensive roiled global markets. Analysts say the move may do little to halt the decline, given weak consumer spending and fears that an AI bubble could burst.
On Thursday, the CSI 300 index of stocks listed in Shanghai and Shenzhen closed down 1%.
Tech champions take the heaviest hits
Even the companies that helped drive a record trade surplus this year were caught in the rout. Shanghai's STAR50 index, which tracks China's homegrown AI and chip leaders, has dropped more than 40% since its June peak.
Unitree, the world's largest humanoid robot maker by sales, surged 600% in its Shanghai debut in August. Its shares have since halved. Memory chipmaker CXMT became the top weighted stock in Shanghai three months after listing, but its valuation has fallen by nearly 30% since its August peak.
"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.
Hong Kong has not been spared. The benchmark Hang Seng index has plummeted more than 12% this year. Together with Indonesia and India, China has emerged as one of the region's worst-performing markets. Ng said Hong Kong is under pressure from its exposure to Chinese companies and from selling by mainland investors. He added that Beijing's growing scrutiny of cross-border investments and tighter offshore tax rules also contributed.
Why a quick fix looks unlikely
Lorraine Tan, director of equity research in Asia at Morningstar, said support measures tend to fade fast. "Any measure to address the stock market sentiment tends to be short-lived if there are no policies to address underlying key issues," she said.
She pointed to imbalances in China's economy, including excess capacity in many sectors, and said a lack of fiscal spending this year has been a drag. Measures to boost domestic consumption are needed, Tan said.
Experts say the turmoil is unlikely to spill over into global markets for now. Strict controls on capital flows limit foreign investors' participation in Chinese equities.
The pain is landing at home. Demand for AI chips and hardware worldwide has accelerated Chinese exports and lifted third-quarter growth above expectations. But stagnant consumption and a prolonged housing downturn keep weighing on households.
About 70% of Chinese household wealth is tied up in property. Since that sector began unraveling five years ago, savings have stayed trapped in falling assets, pushing some capital into the stock market. With Beijing tightening restrictions on offshore trading in recent months to curb capital flight, mainland retail investors have fewer places to go.
"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 Dutch bank ING.
