China Market Bleeds $2.4 Trillion

The Chinese stock market has lost $2.4 trillion since May. This massive drop stems from investor anxiety over artificial intelligence. The STAR 50 Index, which tracks tech firms on the Shanghai exchange, has fallen 40% since June. Broader market indexes dropped by roughly 20% during the same period.

AI stocks represent more than 40% of total market value in China and Hong Kong. According to Goldman Sachs, this concentration means any decline in AI valuations impacts the entire domestic market. The decline suggests the economy cannot support a booming tech sector despite government efforts.

Beijing launched a 60 billion yuan state-backed AI fund this month to support developers. However, consumers remain reluctant to spend money on technology. Many tech companies struggle to turn a profit. Dan Wang, China director for the Eurasia Group, noted that profit margins are lower than expected. She cited weak domestic demand and rising US interest rates as key factors.

US restrictions also weigh on Chinese firms. The United States has banned Chinese humanoid robots on national security grounds. Washington is considering banning Chinese components in data centers. China relies heavily on exports, so these limits hurt companies that cannot sell enough products domestically.

Beijing is doubling down on robotics to address demographic issues like an aging population. However, demand for robots is currently driven by government agencies and research institutions. Everyday consumers find the products too expensive and impractical for home use. Unitree, a leading robot maker, saw its shares halve after starting trades in August.

Wang stated that embodied intelligence is not yet profitable in the mass market. She described a general anxiety among tech firms about the state-backed model. The government has restricted overseas investment to keep money domestic. New regulations take effect on December 1, but these moves have not increased investment in Chinese markets.

No major stimulus measures are expected before the fifth plenum of the Chinese Communist party. Top officials gather this week to prepare for next year's 21st Party Congress. This meeting is expected to confirm Xi Jinping for a fourth term. Wang warned that any stimulus now would be high risk because officials would face accountability if it failed. Meanwhile, US firm Anthropic filed for an IPO that could raise up to $100 billion, a scale China does not currently match.