In 2025, China’s stock market has welcomed the weakest new year start in nearly a decade. Mainland Chinese investors began massive selling of stocks in early January, leading to a sharp decline in the Chinese stock market.
According to Reuters, just three months ago, short-term speculator Lu Delong had prepared for the market rally driven by Beijing’s stimulus plan. However, his optimism for the Chinese stock market quickly vanished in the first week of the year, forcing him to sell stocks and calculate losses.
The uncertainty surrounding the trade policies of the incoming US President Trump has prompted mainland Chinese investors to initiate massive selling of stocks in early January, resulting in a staggering decline of the Chinese stock market valued at $1.1 trillion.
Disappointed with Beijing’s economic policies and concerned about potential US tariffs, many mainland retail investors are selling stocks, potentially leading to a prolonged downward trend in the Chinese stock market. Retail investors account for about 70% of stock trading in China.
Selling stocks signifies investors casting a vote of distrust once again. Investors have already expressed their pessimism about the Chinese economy in the Renminbi and bond markets, prompting the Communist government to intervene to prevent the depreciation of the Renminbi exchange rate and the decline in government bond yields.
At the end of September last year, the Communist Party of China announced interest rate cuts and introduced a series of market-friendly policies. At that time, desperate investors flocked to the stock market, driving the benchmark Shanghai and Shenzhen 300 indexes up by 40% in two weeks, also known as the “manufactured bull market.”
Subsequently, as investors awaited more concrete policies, the market began to cool down.
Signs of disillusionment in the Chinese stock market started appearing at the beginning of 2025. Prior to this rebound, the Shanghai and Shenzhen stock markets had already fallen by approximately 6% by the close of trading on Monday, making them the worst-performing major markets globally.
In his New Year’s greetings, Chinese Party leader Xi Jinping claimed to have made “a series of progress,” such as in areas like food and electric cars. However, he downplayed the significant obstacles facing the overall economy, such as the real estate crisis, massive debts, and overcapacity.
Since the resumption of trading on January 2, 2025, the Chinese stock market, bond market, and currency market have all experienced significant declines.
The Shanghai and Shenzhen 300 index plummeted by 2.9% on the first trading day of 2025, marking the worst new year start since 2016. The index had dropped by over 5% the previous week, continued to decline after a slight rise on January 7.
On January 13, 2025, the China Securities Regulatory Commission held a system work meeting, outlining five major directions for 2025, including “insisting on stability as a top priority… enhancing the competitiveness and attractiveness of the A-share market.”