China’s benchmark stock index slid into a bear market on Thursday, closing 1.8% lower and finishing 20% below the high it set in June. The CSI 300 has now fallen for ten consecutive weeks — a record losing streak for the gauge — and is down 2.6% this week alone, leaving mainland equities among the world’s worst performers in a year that began with considerable optimism.
The scale of the losses
The index tracks the 300 largest companies listed in Shanghai and Shenzhen, and the damage behind the headline figure is substantial: roughly US$2.4 trillion in market value has evaporated since the market’s peak in May. Hong Kong offered no shelter. Gauges of major Chinese corporates and technology firms fell sharply there too, with Chinese tech shares in the territory suffering their worst single session since April 2025.
The AI trade turns
Technology and artificial-intelligence names took the heaviest punishment as investors reassessed whether the enormous capital being poured into AI infrastructure will ever produce commensurate returns. Among Thursday’s falls, Z.AI dropped 9.4%, MiniMax lost 6.9% and chipmaker SMIC shed 6.1%. The selling spread well beyond pure AI plays: NetEase fell 6.7%, Alibaba 6.1% and JD.com 4.6%.
The reappraisal has been building for weeks rather than arriving overnight. What had been a powerful momentum trade through the first half of the year has given way to a more sceptical reading of spending commitments, depreciation schedules and the timeline to profitability.
Earnings, margins and the consumer
The second strand of the sell-off is more fundamental. Chinese firms have been reporting weakening profit growth as fierce domestic competition erodes margins, a squeeze visible even in sectors where Chinese companies lead the world, such as electric-vehicle batteries. Disappointing results this season have compounded the problem, as has a protracted slump in household consumption.
Expectations of government support have faded in parallel. Investors who spent much of the year positioning for a decisive stimulus package have gradually priced that hope out, removing the floor that had underpinned earlier dips.
Why the falls may not be finished
Shaun Rein, managing director at China Market Research Group, expects further selling pressure ahead, pointing to a combination of geopolitical uncertainty, worries about an AI bubble and deteriorating consumer confidence. He also flags a structural amplifier: China’s unusually large base of retail investors, who tend to head for the exits faster than institutions when conditions turn, adding volatility to an already nervous market.
A regional sell-off, not an isolated one
The Chinese slide came amid a broader bad day for Asian assets. The MSCI Asia-Pacific index excluding Japan dropped 1.8% to a near three-month low, with South Korean technology shares caught in a roughly 4% decline and regional sentiment further unsettled by rising oil prices and renewed Middle East tensions. For a market that entered 2026 as a consensus overweight for global funds, the reversal has been both fast and comprehensive.
