Beijing has stepped up efforts to stabilize its struggling stock markets as enthusiasm for artificial intelligence (AI) equities fades amid slowing economic momentum and the absence of robust fiscal stimulus. The CSI 300 index, which tracks shares listed in Shanghai and Shenzhen, has fallen approximately 20 percent from its June peak, entering what is broadly classified as a technical bear market. Year to date, the index is down about 10 percent.

The decline has spilled over to Hong Kong, where mainland Chinese investors—key participants in the city’s equity markets—have sold around HK$20 billion (approximately $2.5 billion) in stocks so far this month. This trend positions October to record its largest monthly mainland capital outflow since July 2021. Hong Kong’s Hang Seng index has dropped over 12 percent this year, with its technology sub-index plunging more than 30 percent.

In response, authorities in Beijing are reportedly deploying a so-called "national team" composed of state-aligned funds and brokerage firms to support the market. Analysts at Macquarie noted that purchases of Chinese exchange-traded funds (ETFs) by state-controlled investor Central Huijin during the past week may constitute the most forceful intervention since April 2025, when President Donald Trump’s tariff announcements rattled markets. The national team’s intervention is seen as an attempt to establish a price floor and prevent further sell-offs by domestic investors, who dominate mainland trading activity.

Despite these efforts, a sustained market recovery appears contingent on a broader rebound in domestic demand, analysts say. Given that export growth, which has historically driven much of China’s economic expansion, is slowing, internal consumption and investment will be critical for a lasting turnaround.

The technology and industrial sectors have been particularly affected in the recent sell-off. The CSI 300’s industrials sub-index has declined 23 percent since the start of the year. Leading companies in this segment faced significant pressure, including Contemporary Amperex Technology Co. Limited (CATL), the world’s largest battery manufacturer, whose stock in Shenzhen has dropped 37 percent in 2026. Similarly, CXMT, China’s largest producer of DRAM chips, lost around 20 percent of its value last month after a strong initial public offering in July.

In September, the government unveiled supportive measures, including financing provisions for share buybacks, which temporarily boosted the market. However, hopes for further large-scale stimulus have waned amid data showing a decrease in government spending during the first three quarters of the year. Kinger Lau, chief China equity strategist at Goldman Sachs, characterized fiscal policy as having shifted to a contractionary stance, counter to earlier expansion efforts.

Some market participants speculate that increased selling by wealthy investors could be tied to efforts to raise liquidity to cover outstanding tax obligations, potentially dating back many years. Kieron Poon, investment director of Asian equities at Aberdeen Investments, noted no clear fundamental shifts aside from recent tax changes targeting offshore trusts. Lau suggested these tax developments reflect a broader tightening in China’s fiscal policy, adding further pressure on the equities market.