Why China's "national team" buys up stocks
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China has poured billions of dollars into the stock market in recent days to snuff out a tech-led selloff, as it seeks to shore up confidence in the domestic economy.
Why it matters: It's a reminder that despite its prowess as an exporter of goods — and increasingly, AI technology — China remains dependent on exports for growth.
The latest: Chinese shares posted a second consecutive day of gains, after members of the "national team" — a group of state-owned investment funds that Beijing mobilizes to support the markets — reported they had invested some $9 billion into Chinese shares, as part of a government push to put a floor under the market.
The big picture: The attempt to cushion the market is part of a broader government effort to shore up a Chinese consumer economy that has been something of an afterthought in recent years.
The intrigue: China is a paradoxical economic power.
- Chinese technology is now the talk of the AI world. And the performance of low-cost AI models like DeepSeek and more recently Kimi is posing an increasing challenge to U.S. AI leaders like OpenAI and Anthropic.
- China's manufacturing sector, meanwhile, has grown in its dominance, with vehicle exports up by 75% year over year to over 1 million units in June, thanks, in part, to soaring sales of EVs.
Yes, but: At the same time, Chinese GDP growth is decelerating, with second-quarter growth of 4.3% undershooting analyst expectations (4.6%, per FactSet) and well below Q1's 5%.
- Youth unemployment among those ages 16-24 is up, hitting 14.9% in June, and some are suggesting it could climb as high as 20%.
- And housing — long the piggy bank of Chinese households — remains mired in a yearslong collapse that has vaporized significant amounts of middle-class wealth. (On an inflation-adjusted basis, house prices are now back down to where they were in 2006, according to the Bank for International Settlements.)
What they're saying: "Activity in the broader economy outside of high-tech remains sluggish or has weakened. Resilient and growing exports reflect ever-expanding production capability amid stagnating domestic demand," Goldman Sachs analysts wrote in a note earlier this week.
Between the lines: That stagnating demand, which may have been compounded recently by the Iran war, has shown up in weaker earnings for Chinese companies lately.
- That has helped send China's CSI 300 down more than 10% from its recent June 22 peak through the end of last week. (The recent bounce has cut those losses to around 6%.)
- At the same time, growing concerns about an AI bubble took the STAR 50 — a tech-heavy index — down more than 20% from its recent high on June 30 through the end of last week. (After Monday's rally, it's down 14%.)
Reality check: Chinese leaders don't have to worry about unhappy voters — or any voters, actually.
- So when push comes to shove, keeping consumers happy often loses out to efforts to boost production in decisions made by policymakers.
The bottom line: But as the effort to stabilize the market shows, keeping some domestic demand alive is important given that the nation's increasing reliance on exports as the source of growth could provoke fresh pushback.
What we're watching: China's plans to goose growth are expected at a meeting of its Politburo later this month.
