A wave of optimism is sweeping through China’s equity markets as an unprecedented mound of household savings—now exceeding 160 trillion yuan ($22 trillion)—begins to leave the safety of deposits and surge into stocks.
With deposit rates slipping below 1% for the first time and faith in the property market badly shaken, investors are increasingly turning to equities in search of better returns, igniting bullish momentum across the country’s key stock indexes.
Market analysts point to a potentially transformative moment. China’s household savings stash is now so vast it equals more than a third of the total U.S. stock market capitalization, according to HSBC. The firm noted that 90% of daily turnover is from Chinese retail investors.
The sheer scale of these funds provides Chinese equities with a solid underpinning, fueling expectations of sustained inflows. The shift is already making itself felt: trading activity on the Shanghai and Shenzhen stock exchanges has soared to levels not seen in years, with Monday’s turnover nearing 2 trillion yuan.
Morgan Stanley notes that the outflow from bank deposits—spurred by falling interest rates—has rapidly accelerated, providing a fresh wave of liquidity that is lifting Chinese stocks.
The CSI 300, tracking leading stocks in Shanghai and Shenzhen, has rebounded over 24% from April lows, while the Shanghai Composite has climbed more than 25% in the same period. Both indexes continue to ride a wave of retail enthusiasm, bolstered by policy support and hopes for further monetary easing.
The bullish case is further reinforced by Goldman Sachs, which observes that maturing term deposits are now flowing steadily into the stock market, reflecting changing investor attitudes in the face of falling yields on traditional savings products. The investment bank expects this rotation to continue as long as deposit rates remain compressed and the allure of property investment fades.
Underlying this sentiment is a profound shift in risk appetite among China’s vast middle class. For decades, real estate was king, making up as much as 60% of household assets. But after several high-profile shocks, including the collapse of Evergrande and warnings of a housing surplus, confidence has dramatically eroded. Now, with both government policy and market forces nudging savers into the equity market, a new era looks to be taking shape for Chinese capital markets.
Bankers and strategists widely see the potential for a virtuous cycle: as stock prices rise and household portfolios benefit, more cash may follow, supporting further market gains. Morgan Stanley projects the CSI 300 could climb to 4,700 points in the near term, an upside of about 6% from current levels.
As Chinese households learn to navigate this new landscape, all indicators point to the stock market being the biggest beneficiary of this seismic shift in personal wealth allocation—heralding a potential long-term bull run for China’s equity investors.
