SHANGHAI: What started out as a year of hope for China’s stock market has turned into one of disillusion for its 250 million retail investors.
Kicking off 2026, millions across the country plowed money into the market, betting that China’s drive for self-sufficiency in artificial intelligence, semiconductors and robotics would produce a new generation of winners.
Optimism turned feverish as China joined a global tech rally. Initial public offerings were subscribed thousands of times over as national champions came into the market, while spectacular debuts and runaway rallies minted fortunes overnight.
Now, Chinese equities are in a bear market, nearly US$3 trillion of value wiped out as major indexes erased a year of gains.
Trading volumes have dwindled as investing became a self-deprecating joke for many, with Beijing’s latest effort to bolster the market seen stemming the bleeding at best, rather than engineering sustainable gains.
“The A-share market is a slaughterhouse for ordinary day traders,” said Zhu Shengwei, a full-time retail trader in Shenzhen.
“We are always last to see where the money is moving and often arrive just in time to provide an exit for shareholders and earlier investors.”
In a streak of dark humor, smaller investors have dubbed the onshore market, known as A shares, “Myanmar A” – a nod to the South-East Asian country’s notorious scam compounds.
Chinese shares suffered their longest selling streak on record and trading is drying up from the height of the euphoria.
It’s a familiar pattern. The market has struggled for decades to become a dependable engine of household wealth. Over the past 10 years, the CSI 300 has returned an average 4.2% annually, against 15.6% for the S&P 500 Index.
Since 2021, only sanctions-ravaged Russia has fared worse among major global markets.
That is all the more startling for an economy that has expanded by about 7% annually over the past decade in nominal terms, comfortably outpacing developed nations, while churning out global winners such as BYD Co and DeepSeek.
The disconnect points to a central paradox: success in building industries and companies has not always translated into rewards for their shareholders and financial benefits for broader swaths of society.
“China can succeed in technology while shareholders struggle to earn a return,” said Kenneth Goh, director of private wealth management at UOB Kay Hian in Singapore.
“Policy support can build capacity without giving companies the pricing power to protect margins. It began as an earnings problem and has become a confidence problem.”
Retail investors in China are hardly alone in getting burned by speculative trading.
With the WallStreetBets phenomenon turning high-risk speculation into something of a spectator sport, research on Robinhood users found that stocks attracting the heaviest retail buying tended to reverse, bringing pain to traders who followed the herd.
The pattern has played out in Asia with individual investors in South Korea racking up the equivalent of US$1.7bil in realised losses on leveraged single-stock products in less than three months this year.
But the global downturn proved far more punishing in China than in other markets.
The selling snowballed into a broader rout that left major gauges in the red, among the weakest globally this year.
Some indexes are now threatening to surrender all their gains from the 2024 stimulus.
For households already nursing losses from a devastating property bust, that’s closing off another avenue for building wealth and deepening doubts about where future prosperity will come from.
“The dominant feeling among investors today is one of helplessness, and in many of the chat groups, the mood is close to despair,” said Zhu, adding that he is abandoning stock-picking in favour of quantitative strategies.
“I’ve watched people pour savings and the best years of their lives into this market, and still they’re left wondering: how did decades of extraordinary economic growth create so little lasting wealth?”
Recognising the precarious situation, authorities this week reached back to a playbook from 2024 to inject liquidity into the market and make funding cheaper to support share purchases.
State investors known as the “national team” have resumed aggressive buying to put a floor under the rout, while companies have answered regulators’ calls with buybacks and pledges to return more cash to shareholders.
For all the firepower being brought to bear, the market reaction has been muted, with the CSI 300 Index up about 3% this week.
Gauges are struggling to repeat Wednesday’s surge, which was helped by an Asia-wide rebound, with leveraged traders unconvinced.
That is unlikely to satisfy investors like Allen Sun, who works in cross-border trade.
Sun says the meltdown has extinguished the little hope he still had of making serious money from stocks and has cut his stock portfolio to about 100,000 yuan, a 10th of its peak size.
“This is a market built for financing, not long-term investing, serving the fundraising needs of company founders and local governments before those of small traders,” said Sun, who began trading three years ago.
“That’s where the trust problem comes from. The moment you start talking about ‘having conviction’ and the bigger picture, you’re the one left holding the bag.”
The stock market has long carried a casino-like reputation, fuelled by frenetic waves of money chasing the latest hot trade.
Retail investors hold only about 30% of the market by value but account for roughly 70% of turnover, amplifying swings.
The lure of the market is as much the adrenaline of speculation and the hopes of getting rich quick as long-term wealth creation.
For Daniel Yang, figuring out why he kept losing money became an obsession this year.
After being burned by property a few years ago and then on stocks, the Guangdong-based machinery salesman said his existing depression worsened to the point of physical symptoms.
The setbacks shattered his confidence in almost everything he thought he knew about investing, despite having studied finance at university. — Bloomberg
