China’s Tech-Led Stock Rally Defies Economic Fundamentals as Retail Investors Dominate

China's CSI 300 tech index surged to its highest level since 2015, fueled by AI optimism, domestic chip-building initiatives, and government interventions against predatory pricing. The broader index has gained 16% year-to-date, approaching a three-year high despite warnings from analysts about its disconnection from economic realities.

Retail investors now account for 90% of onshore trading volume - a stark contrast to the NYSE's 20-25% retail participation. Standard Chartered's Raymond Cheng notes the rally is being driven by households shifting savings from banks to equities, with only 5% of China's 160 trillion yuan ($22T) household savings currently deployed in stocks.

The momentum reflects a search for yield as deposit rates decline and property investments remain stagnant. This retail-driven surge creates volatility risks, particularly for tech sectors benefiting from AI and semiconductor themes.