China’s Retail Investors Flock Back to Stocks as Alternative Assets Tumble

As traditional investments crater, Main Street traders pivot hard into equities—proving once again that when the going gets tough, the tough go back to what they know.

The Great Rotation

Real estate cracks, bonds bleed, crypto implodes—and suddenly that old-school stock portfolio doesn't look so bad after all. Chinese retail investors are dumping battered alternative assets and piling into shares at a pace not seen in years.

Numbers Don't Lie

Account openings surge, trading volumes spike, and margin debt expands—all the classic signs of a retail revival. They're chasing dividends, betting on stimulus plays, and rediscovering the thrill of watching tickers go green.

Same Game, New Players

It's not the first rodeo for these investors—many got burned in previous cycles but can't resist the siren song of a potential rebound. Some things never change: hope springs eternal, and everyone thinks they'll be the smart money this time around.

Just wait until they discover how much faster they could lose money in crypto—now that's what we call financial innovation.

Banks cut rates, bonds disappoint, homes lose shine

Five-year fixed savings accounts at the country’s top four banks are paying around 1.3%. That’s down from 2.75% in 2020. If you go for demand deposits, it’s worse—0.05% a year. The once-popular Tianhong Yu’E Bao money-market fund, managing around $110 billion, is returning just 1.1%, half of what it gave investors earlier this year.

Bonds aren’t making up for it either. The people holding Chinese government debt have seen more red than green this year. Yields might be climbing, but they’re still trash. The 10-year benchmark sits at 1.80%, compared to a five-year average of 2.58%. On top of that, the government is taxing interest on bonds again. It’s just one more reason for people to pull out.

Property was once the golden goose. Not anymore. The sector is four years DEEP into a slump. Most families already own more than one home. Buying another doesn’t make sense—especially when developers can’t even finish what they’ve already sold.

President Xi Jinping has made it clear that “houses are for living, not for speculation.” That message has landed. China International Corporation Corp says real estate now makes up 58% of household wealth, down from 74% in 2021. Over the same period, exposure to stocks and high-risk financial products ROSE to 15%, up from 9%.

Wealth products slow down, foreign stocks out of reach

Wealth management products (WMPs) are tanking too. The average annualized return on both fixed-income and mixed-strategy WMPs is now under 3%, based on recent performance.

That’s two straight years of weak payouts. Life insurance is no better. Some of Ping An Insurance’s universal policies used to give 4.3% returns. Now it’s 2.5%.

Some investors have looked abroad, especially toward U.S. tech. But China’s capital controls block that path. Locals can only convert $50,000 per year into foreign currency.

Even funds that allow access to global stocks are capped. And if you do manage to invest abroad, get ready to hand over 20% of your earnings in taxes. That tax, paired with strict limits, makes overseas bets painful.

So, here’s where things stand. Investors are boxed in. All the SAFE options are giving garbage returns. The exciting ones are locked behind red tape.

That leaves stocks—local ones—as the only thing still breathing. Analysts say most investors will probably keep piling into China’s market because there’s nowhere else to go.

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