China’s $11T market leaves investors cold, pressuring Xi’s growth goals

[Shanghai Stock Exchange Building]
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China’s stock market, worth roughly $11 trillion, has struggled to reward investors, creating challenges for both President Xi Jinping’s growth agenda and global trade relations, Bloomberg News reported on Sunday.

Despite a recent rally, Chinese benchmarks have only just returned to levels from a decade ago, far trailing the gains of U.S. equities. A $10,000 investment in the CSI 300 (NYSEARCA:ASHR [https://seekingalpha.com/symbol/ASHR]) ten years ago would be worth about $13,000 today, compared with more than $30,000 if placed in the S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]).

Analysts say the problem is structural. Since their inception in the 1990s, Chinese exchanges have focused more on funneling household savings into state-driven projects than on shareholder returns. That legacy has produced an oversupply of new listings, weak investor protections and frequent scandals. Liu Jipeng, a longtime market observer, remarked that the system often favors financing needs over investor interests.

The underperformance helps explain China’s high household savings rate, about 35% of disposable income, and limits consumer spending at a time when Beijing wants domestic demand to carry more of the economic load. Xi is targeting 5% GDP growth while also confronting U.S. tariffs, but lackluster equity returns make it harder to spur confidence.

Reform efforts have had mixed results. Regulators have tightened IPO standards and pushed companies to pay higher dividends. Payouts reached 2.4 trillion yuan ($334 billion) in 2024, but progress has been uneven. CSI 300 (NYSEARCA:ASHR [https://seekingalpha.com/symbol/ASHR]) firms still spend a fraction on share buybacks compared with their U.S. counterparts. Meanwhile, authorities are once again fast-tracking tech listings, raising concerns that the emphasis on financing over profitability is returning.

For investors, the message is clear: without deeper reforms that align corporate governance with shareholder value, the market risks remaining, in one strategist’s words, “a paradise for financiers and a hell for investors,” Bloomberg News reported.

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