Chinese equities are on track for their strongest annual performance since 2017, as a technology-led bull market widened to include sectors ranging from gold mining to biotechnology, according to data and analysis cited by Bloomberg.
The MSCI China Index has climbed about 28% so far this year, putting it on course for a second straight annual gain and setting it up to outperform the S&P 500 by the widest margin in eight years, Bloomberg data show. The rally has been fueled by global investment themes such as artificial intelligence and surging commodity prices, alongside domestic drivers including innovation in healthcare and the resilience of online entertainment.
While technology shares initially powered the advance, gains have spread more broadly across the market. At the same time, persistent underperformance in utilities and property developers highlights the structural challenges still facing the world’s second-largest economy, notably its prolonged housing downturn and lingering deflationary pressures.
“While the AI theme may keep a segment of the equity market rallying in 2026, one of the more likely catalysts for a broad-based rally looks to be another stimulus announcement,” Oliver Blackbourn, a portfolio manager at Janus Henderson, told Bloomberg. He added that a clear strategy to resolve the housing crisis or boost consumer spending would likely have the most positive impact on markets.
Among the standout performers this year have been materials stocks, buoyed by a global surge in commodity prices. Bloomberg data show the MSCI China Materials Index has jumped around 108% in 2025, marking its best year since 2003. Companies such as China Gold International Resources Corp., CMOC Group Ltd. and MMG Ltd. have benefited from record-high gold and silver prices, tighter copper and aluminum markets driven by AI-related infrastructure demand, and Beijing’s efforts to curb industrial oversupply.
“Materials have been one of the strongest-performing sectors, and the story goes well beyond short-term price moves,” John Lin, chief investment officer for emerging markets and China equities at AllianceBernstein, said in comments reported by Bloomberg. He pointed to power shortages and structural supply constraints as key longer-term factors supporting the sector.
China’s healthcare stocks have also staged a sharp comeback after several years of losses. Bloomberg reports that the sector has been revitalized by a wave of high-value licensing agreements between Chinese biotech firms and global pharmaceutical companies, including a major deal involving Pfizer Inc. The MSCI China Health Care Index is up about 50% this year, its best performance since 2020, with shares of companies such as 3SBio Inc. and Remegen Co. surging several-fold.
Cui Cui, head of Asia healthcare research at Jefferies, told Bloomberg that China has increasingly become a “supermarket” for innovative drug assets. In the first 10 months of 2025 alone, Chinese biotechs accounted for nearly half of global out-licensing deal value, underscoring the sector’s growing international relevance.
Entertainment and internet-related stocks have also thrived amid economic headwinds. With a weak job market and slower income growth encouraging households to cut back on travel and discretionary spending, more consumers have turned to lower-cost digital entertainment. Bloomberg data show the MSCI China Communication Services Index has risen more than 40% this year, its strongest showing since 2007, driven by gains in companies such as Tencent Holdings Ltd., Giant Network Group Co. and Meitu Inc.
“There are signs that as household consumption adjusts under economic pressure, spending on digital entertainment is proving relatively resilient,” AllianceBernstein’s Lin told Bloomberg, noting solid earnings growth among gaming and mobile content firms.
In contrast, utilities and real estate stocks have lagged badly. Bloomberg data show the MSCI China Utilities Index has been largely flat this year, while the real estate sub-index has gained just 1.4%. Falling energy prices have weighed on power and gas companies, reflecting China’s deflationary environment, while the long-running property crisis continues to drag down developers. Shares of China Vanke Co., one of the country’s largest homebuilders, have fallen more than 30% in Hong Kong this year, making it one of the worst performers in the MSCI China Index.
Despite these weak spots, the breadth of this year’s rally suggests improving investor confidence in selected parts of the Chinese market. As Bloomberg notes, whether the momentum can be sustained into 2026 may depend less on individual sectors and more on Beijing’s willingness to deploy meaningful stimulus to stabilize housing, revive consumption and reinforce the recovery.
