China's technology stock selloff threatens President Xi Jinping's plan to channel household savings into the technology sector. The SSE Star 50 index has dropped 40% in less than four months, and the losses expose weaknesses in Beijing's push for a more attractive domestic capital market.
The technology-heavy SSE Star 50 index has plunged 40% in less than four months, wiping out at least $480 billion in market value. Losses have spread across companies linked to artificial intelligence, electric vehicles and semiconductor manufacturing. Beijing has responded by mobilising state-backed funds, insurers and regulators to support the market.
AI firms make up a large share of China's market
The exposure is broad. Goldman Sachs estimates that AI-related companies account for 42% of China's total stock market capitalization, with more than 3,000 listed companies generating AI-related revenue. Their combined market value was estimated at around $10 trillion as of March.
Individual names have also taken hits. Battery maker CATL has fallen 35% this year, while robot maker Unitree has lost half its value since its August initial public offering. Shares of Suzhou TFC Communication and Victory Giant Technology have dropped as much as 26% over the past week.
China lags other Asian markets
The weakness contrasts with gains elsewhere in Asia. The CSI 300 has declined nearly 14% this year, while Taiwan's benchmark has gained 56% and South Korea's has risen 36%. Japan's Nikkei 225 has advanced more than 25%.
The source ties the gap to the kind of AI success China has had. Many of its AI successes have centred on developing new models, unlike companies benefiting from semiconductor hardware and upstream infrastructure investment elsewhere in Asia.
Why Xi has more at stake than valuations
Beijing wants households to invest in equities, particularly technology companies, to finance AI infrastructure and reduce dependence on property. Property accounts for roughly 70% of Chinese household wealth, and its prolonged crisis has reinforced concerns about deflation.
However, repeated stock market collapses and regulatory interventions have damaged retail investor confidence. The Shanghai Composite remains around 4,000, well below its October 2007 peak of approximately 6,100.
Valuations also remain elevated even after the decline. The STAR 50 trades at around 38 times forward earnings, compared with approximately 20 times for the Nasdaq 100.
Source: Investing.com
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