China's $3.5 Trillion Stock Rout Just Hit Bear-Market Territory — and Profits Are Still Falling

China's stock market has lost $3.5 trillion in value since its peak in May, the CSI 300 has fallen into a bear market after 11 straight losing weeks, and third-quarter earnings are missing forecasts by an average of 9% — a combination that turned a slow selloff into the finance story dominating Sunday, October 25, 2026.

What happened to China stocks?

Chinese equities have lost $3.5 trillion from their May peak, according to data compiled by Bloomberg and reported across multiple outlets on October 25. The onshore CSI 300 Index, which tracks the largest companies on China's mainland exchanges, has dropped about 20% from its June peak and fell for an 11th straight week through October 23 — its longest losing streak since the index was launched in 2005. In Hong Kong, the Hang Seng Tech Index is close to erasing all of its gains since Beijing rolled out its broad growth-support package two years ago.

The gap with the rest of the world is now historic. Through October 23, the S&P 500 was up 11.4% in 2026, while the Shanghai Composite was down 7.0% and the Hang Seng Index down 9.9%. The S&P 500 closed at 2.095 times the Shanghai Composite on October 22 — the widest gap in data going back to 1997.

Key facts

• Total loss: $3.5 trillion in market value gone since the May peak (Bloomberg data).
• Bear market: CSI 300 down about 20% from its June peak; 11 straight weekly falls through Oct. 23, the longest streak since 2005.
• Earnings forecasts cut: Consensus 2026 profit forecasts for MSCI China Index members are down more than 4% since the end of March; Hang Seng Tech profit projections are down more than 13%.
• Q3 misses: Companies that have reported so far are missing estimates by an average of 9%, on track for the second-worst quarterly shortfall in two years.
• Participation fading: Mainland turnover is hovering near its lowest since July last year, and outstanding margin balances have fallen to a one-year low.
• Policy: State-backed "national team" funds have been deployed to stabilise prices, but there is no sign of a large-scale stimulus package.

Why it's blowing up

The rout is not driven by one shock. It is a grinding realisation that weak consumer spending and cutthroat price competition are eating into profits across banking, electric vehicles and artificial intelligence — even as China remains strong in production and exports. "It is too early to conclude that the worst is over," said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. "The biggest concern remains profitability: China's strength in production and exports is not translating consistently into stronger domestic demand, pricing power and corporate earnings."

The early third-quarter reporters show the squeeze. Battery maker CATL posted a profit miss on soft demand and intense competition. China Mobile, which is building out AI infrastructure, saw net profit for January through September fall 8% year on year under cost pressure. Lithium producer Ganfeng Lithium also came in below estimates as prices declined. Margin pressure has left even large internet firms funding expensive AI build-outs through the equity market — Alibaba recently raised $10 billion in a follow-on share sale that diluted existing holders.

Why isn't Beijing launching big stimulus?

China's economy expanded 4.5% year on year in the third quarter, keeping growth for the first nine months inside the government's 4.5% to 5% annual target. That has given policymakers room to keep support gradual. "Policymakers are comfortable with the nature of economic growth," said William Bratton, head of cash equity research for Asia Pacific at BNP Paribas. "As a result, either because they're consciously keeping it in reserve or because philosophically they don't believe in it, there's no urgency to use fiscal measures to promote large-scale consumption."

Not everyone is bearish. Bridgewater Associates' China arm has turned "prudently optimistic," arguing the third-quarter decline was largely a liquidity event, valuations are not stretched, policy favours long-term capital formation, and low bond yields could push more money into equities. For now, most investors are waiting for earnings — not valuations — to turn first.

What's next / takeaway

The next tests are the rest of third-quarter earnings, any signal from Beijing on consumption support, and whether the national team's buying can hold the CSI 300 above its bear-market lows when mainland markets reopen on Monday. Until profit forecasts stop falling, the $3.5 trillion rout remains a story about earnings, not just prices. This article reports what happened and why markets reacted; it is not financial advice.

Sources

• Data Street — China's $3.5 Trillion Stock Market Decline Deepens Amid Profit Pressures
• BigGo Finance — China Stocks Shed $3.5 Trillion as Earnings Misses Deepen Selloff
• BTIN — China Stock Rout Deepens as Profits Weaken and Stimulus Stays
• Briefs — China Stocks Slide as Profits Fall
• Archynetys — Sinking Profits Turn China's $3.5 Trillion Stock Rout Into Trap

FAQ

How much has China's stock market lost?

Chinese stocks have lost $3.5 trillion in market value since their peak in May 2026, according to data compiled by Bloomberg.

Has the CSI 300 entered a bear market?

Yes. The CSI 300 has fallen about 20% from its June peak and dropped for 11 straight weeks through October 23, its longest losing streak since the index launched in 2005.

Why are Chinese company profits falling?

Weak consumer spending and intense price competition are squeezing margins across banking, electric vehicles, e-commerce and AI, while production and export strength is not translating into domestic demand and pricing power.

Will Beijing launch a large stimulus package?

There is no sign of one yet. Third-quarter GDP growth of 4.5% kept the economy inside the government's target range, and state-backed funds have been used to stabilise prices instead of a large fiscal package.