Shanghai Composite Hits Record as A‑Share Market Tops 100 Trillion Yuan on AI Boom, Loose Money, and Trade‑Easing Momentum

At the heart of the market’s lift is the People’s Bank of China’s reaffirmation of a “moderately loose” monetary stance. By keeping liquidity abundant, the central bank has ensured that cash is not idling in bank vaults but is instead flowing into equities. Data released in August show a clear “deposit migration”: household and corporate deposits have slipped while non‑bank financial institutions have seen a corresponding rise in deposits, a pattern many interpret as a reallocation of capital toward the stock market.

The shift is not merely financial; it is also thematic. Demand for artificial‑intelligence infrastructure has exploded as Chinese firms race to train and run large‑scale models. Orders for GPUs, ASIC chips, high‑performance servers, optical modules and liquid‑cooling solutions have surged, turning AI‑related equipment manufacturers into the darlings of the A‑share market. Investors have consequently tilted heavily toward sectors that stand to benefit from this technological wave.

A softer geopolitical backdrop has added further buoyancy. The United States and China have continued to suspend a number of reciprocal tariffs, easing long‑standing trade friction. While the broader strategic rivalry remains, the short‑term relief has dampened worries that trade wars could derail domestic growth, giving market participants a cleaner slate to focus on earnings and innovation.

Sentiment, too, appears to be on the mend. The risk appetite of investors has sharpened, buoyed by a more favourable macro environment—highlighted by diplomatic signals such as the recent US‑Russia meeting that eased global tensions. Yet the optimism is not without its skeptics. A sizable chorus on Weibo dismisses post‑hoc explanations as “马后炮” (hindsight), challenging analysts to predict the next move rather than merely catalogue it after the fact. Some users caution against the classic “chasing highs and selling lows” mentality that has long plagued China’s market, warning that today’s timid buyers may become tomorrow’s over‑aggressive sellers once the rally steadies.

Professional investors seem to be steering much of the current momentum. Observers note a “herd” behaviour among institutions, with block trading and quantitative strategies amplifying price gains, especially in high‑flying names. Retail participation, while rising—as reflected in the climbing financing balance—still has room to grow, according to market commentators. The brokerage sector, whose shares helped push the Composite over its ten‑year peak, is viewed with a mixture of admiration and caution; its rally could be fleeting if it is not underpinned by broader economic fundamentals.

Beyond the immediate market dynamics, the surge carries broader implications. A thriving equity market can serve as a conduit for capital into emerging industries, potentially accelerating China’s shift toward high‑tech and green investments. However, history warns that stock market booms do not always translate into real‑economy growth; past surges have sometimes been decoupled from tangible productivity gains. Moreover, the volatility that has earned the Chinese market the nickname of a “big casino” raises the spectre of heightened risk for inexperienced investors, especially if the rally proves to be short‑lived.

Politically, the episode underscores the delicate balance Beijing must strike. On one hand, a buoyant market can be touted as evidence of economic resilience amid a challenging international environment. On the other, it may intensify calls for tighter regulatory oversight if authorities perceive speculative excesses as a threat to financial stability. The central bank’s loose policy, while currently supportive, also poses a dilemma: too much liquidity risks inflating an asset bubble, too little could choke the momentum that has just begun to build.

In sum, the August 18 rally reflects a rare alignment of policy support, capital flow, sectoral enthusiasm for AI, and a modest easing of Sino‑U.S. trade tensions. Whether this confluence marks the dawn of a sustained bull market or a brief, institution‑driven flare‑up remains to be seen. Investors, regulators and observers alike will be watching closely as the A‑share market navigates the fine line between exuberant optimism and prudent caution.