The China stock market has been on a role – is it a boom or a bubble?

The China stock market has experienced a net rally this year as progress on artificial intelligence, measures aimed at acquiring self -sufficiency of fleas and the Beijing campaign to slow down the optimism of price fuel investors.

But as retail investors push the market above and the bulls encourage support for liquidity and political tail winds, some experts raise questions if the market enters bubble territory.

The Continental CSI 300 index has climbed approximately 16% since the start of the year and has oscillated for almost three years. The CSI 300 information technology index, which measures the performance of technological companies within the CSI 300, last week has reached its highest level since 2015.

“The Rally of China’s current actions seems to be disconnected from economic fundamentals,” said Raymond Cheng, a regional CIO for Northern Asia at Standard Charterd, adding that “retail investors have played a key role because they have moved some of their banking deposits on the stock markets”.

Retail investors dominate the onshore stock markets of China, representing around 90% of daily exchanges, according to HSBC data. This contrasts strongly with the main world exchanges, where institutions run the activity – on the New York Stock Exchange, for example, individual investors represent only 20% to 25% of the volume of negotiation.

According to HSBC, total economies of Chinese Chinese households are currently at more than 160 yuan billions (22 billions of dollars), a record. However, only 5% is allocated to shares, which means that there is room for retail participation to deepen, in particular when the deposit rates fall and the goods remain in disgrace, analysts said at CNBC.

“The fundamentals do not support the momentum, but the markets still lead the fundamentals,” said Hao Hong, director and CIO partner at Lotus Asset Management. “There are few overheating signs on the overall market, but the market pockets are a little too hot.”

“It’s not yet a bubble, but it goes this way,” said Hong. He pointed out that contract research organizations – companies providing research and development services to pharmaceutical, biotechnological companies, medical devices – and technology names such as risky segments, but have stopped labeling them as bubbles.

According to Goldman Sachs, more than 3 billions of dollars in market capitalization have been added to Chinese shares and Hong Kong. But China’s economic data does not offer little confirmation that an authentic and sustainable rebound is underway, said market observers.

Japanese financial company Holdings, Nomura, warned the excessive lever effect last month and potential “bubbles” while the stock market continues to rise even if the Chinese economy shows signs of spraying in the second semester.

China’s economic slowdown worsened in August while a series of key indicators has not succeeded. Low persistent domestic demand and Beijing efforts to reduce industrial overcapacity weighed on production.

Industrial production increased by 5.2% last month, assumed to grow 5.7% in July and marking its lowest pace since August 2024.

“Until now, we have not seen signs of recovery of macro fundamentals, although the current momentum can be supported by the expectations of structural improvement in the economy,” said Chaoping Zhu, a global market strategist at JP Morgan Asset Management.

Semi-annual reports suggest a certain stabilization in sectors such as AI, semiconductors and renewable energies, and the “anti-involution” of Beijing-aimed at reinstating price wars-could improve the capacity of business profits, Zhu said.

For example, the Chinese flea manufacturer Cambcon has declared record profits in the first half, jumping more than 4,000% over one year to 2.88 billion yuan (402.7 million dollars) in the first six months, highlighting the growing dynamics of domestic fries while Beijing is growing to strengthen its cultivated semiconductor sector.

However, ZHU provides that technological assessments can have “a price in very optimistic expectations”, leaving the market vulnerable to revival before the catching up of gains.