Shocking: China’s Economy Up 1100% But Stocks Still Down 33% After 20 Years

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Chinese Economy Is Booming, But Stock Markets Haven’t Recovered in 20 Years

The Shanghai Composite finished trading on Friday at around 4,113 points. Despite China’s economy growing about seven times larger over the last two decades, the index remains approximately 33% below its highest level in 2007.

Over the same period, the main US stock market index has grown by more than 600%, highlighting a significant difference between China’s actual economic performance and the valuations of its publicly traded companies.

China Sees Booming Economy, Stagnant Index

China’s trade surplus reached a record $1.19 trillion in 2025, and its economy grew by 5% in the first three months of 2026, according to government data.

Germany has now surpassed Japan as the world’s leading exporter of cars and remains a dominant force in global manufacturing.

Yet listed firms have not turned that production base into compounding shareholder value.

Household spending currently makes up 53% of the total economy, which is lower than the roughly 68% seen in the United States. This limits how much profit companies can make, and therefore restrains growth in the stock market.

It seems unbelievable, but consider this: a country has experienced over 1,100% economic growth in the last two decades, achieved a record $1.19 trillion trade surplus, and become the second largest economy globally. Yet, its stock market remains 33% lower than it was in 2007, even as other global markets have surged.

— Bull Theory (@BullTheoryio) May 22, 2026

Retail Flows and Frozen Household Wealth

Individual investors account for nearly 90% of all daily trading volume on Chinese stock exchanges, a significantly higher proportion than the roughly 20% seen in the United States.

Because institutional investment is limited, market reactions are often strong and immediate in response to policy changes, rather than representing consistent, long-term growth. This volatility has led some investors in China to turn to Bitcoin during recent stock market declines.

Real estate issues are making things worse. Beijing’s restrictions on developer debt in 2020 – known as the Three Red Lines – led to Evergrande’s downfall and caused housing prices to fall back to around where they were in 2005.

Because most of Chinese families’ savings are invested in property, many are now reevaluating luxury real estate and choosing to save cash instead.

AI Rally Cut Short

Early in 2025, the release of DeepSeek’s R1 model sparked a significant surge in the tech market, adding around $1.3 trillion in value. This marked the first major independent boost to the market in years. However, China’s Securities Regulatory Commission responded by requiring publicly traded companies and ETF managers to report their AI-related revenue within 20 business days.

In April 2026, DeepSeek released its V4 model, a powerful AI with 1.6 trillion parameters, running on Huawei Ascend processors. This launch had a significant impact on both cryptocurrency miners and Nvidia.

Here are some quick thoughts on DeepSeek:

1. It’s amazing they achieved this with only $5 million in funding – truly impressive.

2. This is very positive news for the entire AI and agent field. The rapid progress in reducing the cost of running these models is incredible and will fuel further innovation and wider adoption.

3. This opens doors for applications that need continuous…

— Zega (@Zega) January 27, 2025

I’ve been watching the market closely, and the response to recent news has been surprisingly calm. This week, we also saw China’s securities regulator, the CSRC, take action against several brokerages – Tiger, Futu, and Longbridge – specifically regarding cross-border trading. This action reinforces China’s existing restrictions on cryptocurrency, which already prevent individual investors from accessing it.

Goldman Sachs predicts home prices will fall another 10% before they hit their lowest point, and they believe household spending will remain weak until 2027.

China’s local government debts have reached about $18.9 trillion, which restricts the government’s ability to implement additional economic stimulus measures.

Until that flips, the gap between China’s economy and its equity benchmark is likely to persist.

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2026-05-23 12:49