Chinese Stocks Lose $3.5 Trillion as CSI 300 Enters Bear Market
Key Facts
Chinese stocks have lost $3.5 trillion in market value since their May peak, and the CSI 300 entered a bear market last week, according to a report published by The Business Times on October 25, citing data compiled by Bloomberg. The decline came as profit forecasts fell and pressure on companies mounted, with no signs of major new stimulus. By contrast, China’s economy grew 4.5% year over year in the third quarter, according to preliminary data published by the National Bureau of Statistics on October 21. But fixed-asset investment contracted 7.2% in the first nine months, underscoring the divergence between output growth and domestic investment performance. The indicators show that broader economic growth has not translated into a balanced improvement across components of demand.
The report attributed pressure on profits to persistently weak consumption and intensifying price competition among companies, factors affecting sectors including banks, electric-vehicle makers and developers of artificial-intelligence models. It described corporate behavior as a “race to the bottom,” referring to competition that is squeezing profits. Earnings forecasts for MSCI China companies for 2026 have fallen by more than 4% since the end of March, while forecasts for the Hang Seng Tech Index have dropped by more than 13% over the same period. Companies in the MSCI China Index that had reported results by October 25 also posted earnings an average of 9% below consensus estimates. The report described this as on track to be the second-worst quarterly miss in two years, reflecting a widening gap between expectations and reported results.
The third-quarter earnings season opened with a negative signal from CATL, whose profit fell short of expectations. The Business Times report linked the result to weak demand and intense competition, calling it an indicator of the pressures facing companies. Fixed-investment data for the first nine months show a 10.4% year-over-year decline in non-government investment, pointing to a broader contraction than in total investment. Investment in the tertiary sector fell 10%, and in manufacturing 2.1%, while investment in the manufacture of computers, communications equipment and electronics rose 9.6%. These sectoral moves came as retail sales growth remained limited at 1.1% year over year in September, the same rate recorded for the first nine months.
Gross domestic product grew 4.5% year over year in the third quarter and 4.6% in the first nine months of 2026, according to China’s National Bureau of Statistics. Fixed-asset investment data, excluding rural households, showed a 7.2% year-over-year decline in January–September. Over the same period, investment in the manufacture of computer, communications and electronic equipment grew 9.6%, despite an overall decline in manufacturing investment. On the consumption front, retail sales of consumer goods rose 1.1% in September and 1.1% in the first nine months. The National Development and Reform Commission said it would step up efforts to expand domestic demand, adding that retail sales of goods and services rose 2.6% year over year in the first three quarters. The figures put weak domestic demand alongside overall output growth, while the investment trajectory remains a source of pressure in the data.
The index did not extend its decline in the final session of the week: the CSI 300 closed at 4,105.33 points on October 23, up 1.71% for the session after falling 1.84% the previous day. The rebound followed its entry into a bear market during the week, according to the report published on October 25. That level is a monthly reading of industrial activity, while the stock index remains affected by earnings forecasts and company results. Friday’s rise does not change the reported market-value losses since the May peak or the decline in earnings estimates since the end of March.
Markets are awaiting the monthly Purchasing Managers’ Index report on October 31 at 9:30, according to the National Bureau of Statistics’ calendar. The 20th Central Committee of the Communist Party’s Fifth Plenum is also being held in Beijing from October 26 to 29, according to the committee’s announcement, while the government said the session would discuss issues related to party governance. The National Development and Reform Commission expects efforts to expand domestic demand to intensify, following a 2.6% rise in sales of goods and services in the first three quarters. Upcoming activity data and changes in profit forecasts remain among the main near-term events for investors as competition pressures and weak consumption persist.