China’s AI stock-market struggles are a warning

Global equities are up 11% this year on the MSCI World index, and South Korea and Taiwan have ridden the AI boom higher, but China’s tech shares have plummeted in the second half of the year onshore and off, and the CSI 300 is down more than 11% so far in 2026. China is tightly stitched into the AI supply chain and has listed model-makers of its own, including z.ai and MiniMax, both of which trade in Hong Kong. The rout has prompted fresh buying from the “national team” of state-owned financial institutions. On 2 November the central bank said it would revive a scheme that helps institutional investors obtain liquid collateral to finance equity purchases, and make it cheaper for companies to borrow to buy back their own shares. Buttonwood offers two China-specific explanations: fiscal tightening (Goldman Sachs reckons the broadly defined fiscal deficit will narrow by 1.4% of GDP this year) and the property slump. On 29 October Fitch said it might downgrade bonds issued by Zhuhai Huafa Group, a state-owned conglomerate with debts of US$56.8B; Bloomberg reported delayed payments on two trust products and a request to extend bank loans, and the share price of its listed property unit fell by more than a fifth, even though the city of Zhuhai, the main owner, is thought unlikely to let it default on a publicly traded bond. A third, more worrying explanation, in the column’s view, is that China may be an early victim of fading enthusiasm for AI. In the West investors have begun to worry that models will be commoditised; in China “that grim end-game was more or less the industry’s starting-point,” because labs openly shared weights. Epoch AI estimates that the AI-related revenues of China’s six leading firms together amount to about a tenth of the combined revenues of OpenAI and Anthropic. China has also tested investors with a crowded IPO pipeline, which the column suggests may foreshadow indigestion around Anthropic’s listing in America’s much bigger market. It frames this as a possibility, not a forecast: China may be less an outlier than an omen.