China’s bull market pauses for breath
China's CSI 300 stockmarket index has fallen by 10% from its latest peak. But investors may just be catching their breath.

While US spending balloons, China has begun to tighten the fiscal taps, says The Economist. Prime Minister Li Keqiang has announced a lower fiscal deficit target for this year. Meanwhile, the central bank has begun to withdraw liquidity in a bid to cool speculation. Guo Shuqing, the country’s chief banking regulator, recently warned of bubbles in domestic property and global financial markets. Chinese investors have been put “on notice”.
The newly published five-year plan has not done away with the traditional growth targets, but they do appear to be “vaguer and more flexible than before”, says Andrew Batson of Gavekal Research. Instead, there is a pivot towards a “pledge to keep China’s debt-to-GDP ratio stable or declining”.
The renewed emphasis on debt levels has given investors pause for thought, say Joanne Chiu and Xie Yu for The Wall Street Journal. The CSI 300 stockmarket benchmark soared by 27% in 2020. Yet the index has slid by 10% from its latest peak. Still, this “slow bull market” may not be over yet, says Wendy Liu of UBS Global Research. Investors may just be catching their breath.
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A key bullish factor is that Chinese mergers and acquisitions (M&A) activity has had its “busiest start to a year on record”, say Tabby Kinder and Thomas Hale in the Financial Times.
The total value of domestic dealmaking amounts to $77.5bn so far in 2021. Mainland Chinese businesses used to go on acquisition sprees abroad; but now Beijing wants to develop more domestic, consumer-led industries, while geopolitics has made overseas acquisitions more difficult in recent years, says David Brown of PwC. “That has redirected a lot of capital that would previously have gone outside the country back into domestic acquisitions”.
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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
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