Commentary: Why This China Bull Market Is Different — The ‘Tech Revaluation’ Boom

Since the beginning of 2025, optimism about Chinese technology has generated a strong bull market in China’s A-share equity markets. However, as September arrived, momentum slowed and volatility increased, leading to concerns about a possible market correction. Historically, bull markets are not necessarily characterized by uninterrupted price appreciation—after strong rallies, markets often experience significant corrections, sometimes exceeding 10%, before recommencing their upward trajectory. These correction periods often present prime buying opportunities for investors looking to enter the market at more favorable valuations. [para. 1][para. 2]

A bull market typically requires four key factors: improvement in corporate earnings, especially among listed companies; a robust and well-structured capital market system fostering reasonable valuations; a steady flow of medium- and long-term capital as well as ample short-term liquidity; and increased investor risk appetite coupled with enhanced market expectations. Fundamentally driven by company quality and sound market systems, bull markets in the long run depend on earnings. Short-term rallies, however, might be sparked and sustained by ample liquidity or heightened expectations, leading to temporary valuation-driven surges. [para. 3][para. 4]

The current A-share bull market emerged from a unique combination of modern institutional changes and new narratives in Chinese science and technology. This upward movement has been fostered by global capital reallocations amid worldwide transformation, a shift in expectations following powerful economic stimulus measures at the Sept. 26, 2024, Politburo meeting, and major breakthroughs in artificial intelligence during the year. These elements triggered a substantial increase in investor risk appetite, leading to what is described as a “tech revaluation bull.” Even though China’s economic fundamentals have not drastically changed, capital markets often reflect future prospects rather than present realities. [para. 5]

Three main influences have shaped this upward cycle. First, a shift in macroeconomic logic and renewed narratives, particularly around AI, have improved risk appetites and market sentiment. Policies aimed at reducing disorderly competition (“anti-involution”) are expected to improve corporate profits by rationalizing supply and spurring a gradual recovery. Industrial policies in fields like artificial intelligence have created substantial growth potential across entire industry chains. [para. 6]

Second, ongoing improvement of the capital market’s foundational systems has elevated the quality of listed companies and increased the market’s overall appeal. Government support has grown notably more bullish, with the capital market now seen as a key facilitator of China’s modern economic goals: providing full-chain financial support for innovative industries and new “quality productive forces.” Past bull markets followed similar government-led strategies, such as in 2005 during state-owned enterprise reform or in 2014–2015 under the “mass entrepreneurship” strategy. New listings like the STAR Market and reforms encouraging buybacks and dividends have made the market increasingly attractive and fostered innovation. [para. 7]

Third, the continuous inflow of medium- and long-term funds is underpinning the bull market. Regulatory changes have allowed insurance funds to allocate more to equities (increasing limits from 30% to 35%) and social security funds (20% to 25%), while declining property prices and deposit rates have prompted households to shift assets into stocks, amplifying the rally. [para. 8]

Looking forward, these supports remain solid: China’s tech industries are advancing from “follower” to “leader,” ongoing reforms are further optimizing market infrastructure, and both domestic and foreign investors continue to allocate funds into Chinese equities. This suggests the A-share bull market’s foundation is more enduring and its duration could surpass previous rallies. [para. 9]

Nonetheless, the market has yet to experience a substantial correction in 2025, and if policy stimuli do not meet expectations or tech momentum slows, a significant pullback is possible. Despite this, the prognosis is for continued market growth, with increased volatility providing buying opportunities amid short-term pullbacks. [para. 10][para. 11]

Luo Zhiheng, the chief economist and research institute head at Yuekai Securities, authored these views, which may not reflect the positions of Caixin. [para. 12][para. 13]