Career
Menu

The China Briefing

Dam good energy

China’s retail investors have been joining the party. Margin financing is at a 10 year high. Mainland flows into Hong Kong have climbed to 25% of daily turnover.

Please find below our latest thoughts on China: 

  • One of the features of the China equity market recovery this year has been the increasing participation of mainland China retail investors.
  • The China A-Share margin financing and securities lending balance, a good real-time sentiment indicator, has reached a 10 year high.1
  • There have also been strong flows from mainland China into the Hong Kong market. Southbound Stock Connect volumes now account for around 25% of daily turnover in Hong Kong, double the level of three years ago.2
Chart 1: Margin trading outstanding balance in China A-Shares (CNY billions)
Chart 1: China Consumer Confidence Index

Source: Bloomberg, Allianz Global Investors, as of 7 August 2025

  • There are a number of reasons for this increased retail participation, in our view.
  • Partly, it reflects the relative paucity of other investment options for domestic investors, especially with 10-year government bond yields hovering around 1.7%.3 There are more than USD 20 trillion in household deposits, much of which was invested in one-year time deposits when rates were significantly higher than they are now.4
  • There are more than USD 20 trillion in household deposits, much of which was invested in one-year time deposits when rates were significantly higher than they are now.5
  • And partly it also reflects growing domestic excitement about emerging growth themes, mostly based around technology-related developments.
  • An initial catalyst was the DeepSeek moment, which illustrated how China’s technological progress is far more advanced than previously understood.
  • More recently, the news that the US revoked export curbs that required US companies to obtain licenses to provide chip design software to customers in China – as part of an agreement intended to ease trade tensions – has also provided a further boost to China’s AI ambitions.
  • More broadly, there has been an emerging realisation that the Chinese economy is transforming rapidly. The original semiconductor embargo in 2018 pushed China to invest heavily in a bid for greater self-sufficiency in key industrial components.
Chart 2: Southbound Stock Connect as % of Hong Kong equity market turnover
Chart 2: China A-Shares Net Liquidity (RMB Billion)

Source: Wind, Allianz Global Investors, as of 11 July 2025. Turnover is calculated based on 30 day moving average number.

  • China’s growing technological strength is underpinned by a robust ecosystem that has been steadily developed over many years.
  • A cornerstone of this ecosystem is sustained investment in science and technology education. Of the 12 million university graduates in China this year, approximately 40% hold degrees in STEM fields – science, technology, engineering, and mathematics.6
  • China now awards more doctoral degrees in science and engineering than the United States.7
  • Another critical pillar is China’s energy infrastructure, particularly its focus on expanding electricity generation and distribution.
  • The industries of the future will be increasingly electricity dependent. While data centres are well-known for their high-power consumption, many emerging sectors –such as electric and autonomous vehicles, drones, robotics, sensors and the semiconductors and AI that power them – are also highly energy-intensive.
  • Moreover, the production of essential materials for high-tech industries such as steel, aluminium and copper requires significant electricity for smelting.
  • China has long viewed electricity dominance as a strategic foundation for manufacturing leadership. Its installed power generation capacity is substantially more than the US and EU combined.8
  • Indeed, China already generates more than double the amount of electricity that the US does. It has 42 ultra-highvoltage transmission lines in place, covering 25,000 miles, with another 12 under construction; the US has none.9
  • This extensive infrastructure provides Chinese manufacturers with access to cheap and reliable power nationwide – a major competitive advantage.
  • Within this theme, a recent eye-catching announcement was the start of construction on the world’s largest hydropower project, located in Western China on the Yarlung Tsangpo River.
  • This huge project will require an investment of RMB 1.2 trillion (USD 170 billion). Its power generation capacity will be nearly three times larger than the Three Gorges Dam on the Yangtze and will produce electricity equal to around 2% of China’s current output.10
  • This project ticks a number of high-priority boxes: advancing electrification, reducing reliance on fuel imports, and strengthening energy security.
  • It also significantly contributes to China’s sustainability targets by replacing 90 million tons of coal consumption – equivalent to 2% of the country’s total carbon emissions last year.11 Dam good energy, it might be said.

1 Source: JPMorgan, 11 August 2025
2 Source: Wind, 11 July 2025
3 Source: Bloomberg, 11 August 2025
4 Source: Goldman Sachs, 14 April 2025
5 Source: Goldman Sachs, 14 April 2025
6 Source: JPMorgan, 22 June 2025
7 Source: JPMorgan, 22 June 2025
8 Source: Gavekal, 14 July 2025
9 Source: Gavekal, 14 July 2025
10 Source: Gavekal, 1 August 2025
11 Source: JPMorgan, 3 August 2025

 

  • Disclaimer
    Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

    The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

    This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of this document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced, except for the case of explicit permission by Allianz Global Investors. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional /professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.

    This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors UK Limited, authorized and regulated by the Financial Conduct Authority; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK).

    AdMaster: 3420012

Allianz Global Investors

You are leaving this website and being re-directed to the below website. This does not imply any approval or endorsement of the information by Allianz Global Investors Asia Pacific Limited contained in the redirected website nor does Allianz Global Investors Asia Pacific Limited accept any responsibility or liability in connection with this hyperlink and the information contained herein. Please keep in mind that the redirected website may contain funds and strategies not authorized for offering to the public in your jurisdiction. Besides, please also take note on the redirected website’s terms and conditions, privacy and security policies, or other legal information. By clicking “Continue”, you confirm you acknowledge the details mentioned above and would like to continue accessing the redirected website. Please click “Stay here” if you have any concerns.