China’s Stock Market Surges Despite Signs of Economic Fragility and Social Discontent

BEIJING — November 24, 2025 — China’s stock markets have attracted a significant influx of foreign investment this year, even as the country’s economy shows signs of stagnation and structural challenges, according to financial analysts and observers.

Data from the Institute of International Finance indicates that offshore inflows into Chinese equities from January through October surged by 443.9% compared to the same period last year. This renewed investor interest contrasts with widespread concerns about the sustainability of China’s economic growth and the underlying health of its financial system.

Despite the rising markets, experts caution that the optimistic narrative surrounding China’s global economic dominance may be misplaced. Rana Foroohar of the Financial Times notes that many investors have fully embraced the idea that China will continue its ascent as a global hegemon, particularly after perceived victories in trade disputes and advancements in technology sectors such as semiconductors and artificial intelligence. However, Foroohar and others argue that China’s political and economic structures may hinder its ability to lead globally.

The Chinese economy is described as flatlining, with official gross domestic product figures potentially overstated. The country’s current economic model, heavily reliant on investment-driven growth, is under strain. Decades of over-investment in real estate have created a substantial property bubble. He Keng, a former senior statistics official, estimates that China has enough vacant housing to accommodate its entire population of 1.4 billion people. This oversupply poses risks of either a market crash or prolonged stagnation similar to Japan’s experience.

Infrastructure development, particularly the expansion of the high-speed rail network, has also contributed to financial pressures. While technologically advanced, the rail system reportedly operates at a loss when accounting for capital and debt servicing costs, raising questions about the long-term viability of such investments.

Despite these challenges, Chinese President Xi Jinping has maintained the current economic strategy. At the Communist Party’s Fourth Plenum last month, the 15th Five-Year Plan was unveiled, emphasizing “high-quality development” through advanced technology initiatives. This plan aims to enhance manufacturing efficiency, exemplified by the country’s highly automated “dark factories,” which operate with minimal human labor.

The political environment in China remains a defining factor in its economic trajectory, influencing both domestic policies and international perceptions. While foreign investors continue to pour capital into Chinese equities, the underlying economic and social issues suggest a complex and potentially fragile outlook for the country’s future growth.