Chinese equities extended their rally in August, with gains largely concentrated in the AI compute chain. While consumer and healthcare sectors took a pause, the strength of the market was underpinned by visible progress and substantial market opportunities across the computing power ecosystem. This reflects both the technological drive and the unique structure and ecosystem of China’s equity market. On the macro front, inflation remains muted, but activity data signalled resilience. The MSCI China Index gained 4.9% and the MSCI China A Onshore Index advanced by 12.8%. Domestic tourism registered a 21% year-over-year increase in the first half of 2025, while county-level regions are emerging as new growth drivers. Household deposits fell by 0.7% in July, representing a withdrawal of over RMB 1 trillion.

China’s equity markets posted solid gains in July, supported by improving sentiment and thematic sector strength. Mainland-listed A-shares outperformed Hong Kong-listed H-shares, reversing the relative outperformance seen in the first half of the year. The rally was led by themes such as computing power, “anti-involution” (efforts to curb excessive internal competition), biotech and new consumption. The MSCI China Index and the MSCI China A Onshore Index were up by 4.8% and 4.4% respectively. Macro-sensitive sectors, including home appliances, real estate, and food & beverage, remained muted. Inflows from retail, pension, and insurance investors remained strong, and average daily turnover surged to approximately CNY 0.8 trillion, up from CNY 0.5 trillion in June.