Chinese households are cautiously returning to equities, as dwindling returns from other asset classes leave few attractive alternatives, Bloomberg reported.
The CSI 300 Index has jumped more than 25% since hitting April lows, buoyed by enthusiasm over artificial intelligence and a softer tone from Donald Trump on China. In contrast, wealth management products, money-market funds, and real estate remain mired in a prolonged slump, reviving an old market mantra: there is no alternative to stocks.
China’s $23 trillion household savings pool is a tantalizing prospect for global financial firms. While the recent rally has been fueled mostly by institutional investors and foreign inflows, small investors are expected to play a bigger role. JPMorgan Chase & Co. projects about $350 billion of household savings could shift into equities by the end of 2026.
“The pressure to save is fading,” said William Bratton, head of cash equity research for Asia Pacific at BNP Paribas Exane. The sheer size of household savings is one reason his firm is “structurally positive” on China’s stock market, he said.
Other investment options look bleak. Five-year bank deposits offer around 1.3% interest, less than half the rate in 2020, while money-market funds like Tianhong’s Yu’E Bao yield just over 1%. Government bonds have delivered more monthly losses than gains this year, with benchmark 10-year yields hovering near 1.8%, well below the five-year average.
Property, once the favored investment channel, remains in a deep downturn. Used-home prices show little sign of recovery, and President Xi Jinping’s warning that “houses are for living, not for speculation” continues to dampen investor appetite. Real estate now accounts for about 58% of household wealth, down from 74% in 2021, according to China International Capital Corp.
Wealth management products and insurance policies have also slumped. Average returns on wealth management products are below 3%, while Ping An Insurance Co.’s universal policies yield just 2.5%, compared with 4.3% before the pandemic, Bloomberg noted.
Overseas markets offer limited relief due to China’s strict capital controls, which cap foreign currency conversions at $50,000 annually and impose a 20% tax on overseas investment income.
That leaves equities at home as the most attractive option. With alternative assets underperforming and access to foreign markets restricted, analysts expect households to continue ramping up their bets on domestic stocks, potentially adding fresh fuel to the rally.
