China’s Stock Market: A Retail Investor’s Guide

China has held the world’s second-largest GDP for over fifteen years, reaching $19.4 trillion by the end of 2025. Only the United States is ahead with $30.6 trillion, and Germany is in third place with $5 trillion. The gap between China and the United States is smaller than the advantage China has over its closest rival. It’s no surprise that authoritative voices like Ray Dalio, founder of Bridgewater Associates, are talking about China’s gradual ascent to global superpower status. But how can the average investor not just observe this process but also profit from it?

It’s important to clarify a key point right away: economic growth does not guarantee stock market growth. History knows many examples of a country’s GDP growing steadily, while stock prices moved in the opposite direction—and vice versa. The market, as we know, lives not in the past, but in expectations of the future, and the horizon of these expectations rarely exceeds six to nine months. Many factors influence these dynamics: monetary and fiscal policy (or rather, the market’s perception of it), investor sentiment, company earnings reports relative to analyst consensus forecasts, and, of course, those very same “unaccounted for variables” that emerge precisely when you least expect them.

For international investors, the Hong Kong stock market has traditionally served as the primary window into the Chinese economy. The Shanghai exchange is more focused on domestic demand, so before diving into analyzing a company, it’s wise to confirm that its shares are listed in Hong Kong. 

In 2025, the Hong Kong stock market demonstrated impressive performance: the Hang Seng Index rose 27.8%, its best performance in a decade. The technology sector, traditionally considered the market’s engine, gained 22%, but was not the main beneficiary of the year-long rally. Biotech companies led the way, soaring 64.5% on the back of breakthroughs in drug development and the expanding global presence of Hong Kong players. The commodities sector demonstrated an even more impressive trajectory: the mining and metals index gained 160%, strengthening on the back of sustained growth in precious and industrial metals.

At the same time, the year proved challenging for a number of traditional market leaders. Online platforms and grocery delivery services faced shrinking margins and increased regulatory scrutiny. Some electric vehicle manufacturers, caught up in price wars and experiencing cooling demand in the Chinese domestic market amid a simultaneous reduction in government subsidies, also posted negative dynamics. Traditional retailers also suffered a correction. Collectively, the year’s underperformers closed with declines ranging from 16.8% to 31.9%.

Thus, 2025 became a period of profound structural revaluation for the Hong Kong stock exchange. Growth, fueled by the commodity cycle and breakthroughs in healthcare, offset the slowdown in established technology and consumer segments, identifying new centers of capital attraction in the Asian financial market.

The currency component is equally important for investment results : impressive returns in a currency weakening against your underlying asset may prove illusory when converted into “real money.” Fortunately, the Hong Kong dollar is pegged to the US dollar, simplifying calculations—though it doesn’t eliminate the need to monitor the dollar’s performance, which has recently exhibited behavior worthy of its own psychological profile.

When it comes to promising sectors, China is currently demonstrating leadership in several key areas: rare earth metal mining and processing, artificial intelligence and robotics, electric vehicles, wind and solar energy, and consumer electronics. In many of these areas, Chinese companies are not only present on the global market but are setting trends and scale. For those who prefer targeted bets, individual stocks are available. For those who value diversification, ETFs covering the best companies in an entire sector are a good choice—a kind of “fruit basket” instead of betting on a single ripe peach.

However, as we know, risk-free investing doesn’t exist. Among the most notable factors requiring attention when dealing with Chinese assets are geopolitical tensions, demographic challenges, the need for accelerated automation in manufacturing and exports (a key driver of the economy) with the attendant quality control risks, and structural imbalances in the real estate sector—although the worst in this area may already be behind us. As the saying goes, even on a sunny day, it pays to carry an umbrella.

Author: Yevgeni Agerd, Founder and CEO of Welrex

www.welrex.com