China's benchmark CSI 300 index fell into bear-market territory on Thursday, dropping 20% from its June peak as selling pressure persisted across Shanghai and Shenzhen.
The index has now declined for 10 consecutive weeks, a stretch that reflects mounting worries about corporate profitability, economic growth and investor confidence.
According to LSEG data, the CSI 300 lost more than 1% on Thursday and was down 2.6% for the week.
The gauge tracks 300 of the largest companies listed on the two mainland exchanges.
Structural Problems and Weak Profits
Jordan Cvetanovski, chairman and chief investment officer at Pella Funds, said structural economic challenges continue to weigh on Chinese equities after years of excess capacity and overinvestment.
He pointed to difficulties facing Chinese businesses, including firms in globally competitive industries such as batteries, though he still sees selected opportunities in that sector.
Slowing profit growth has added to the pressure as intense competition squeezes margins.
In September, China recorded its weakest industrial profit growth of the year, according to the source report.
The wider economy has also lost momentum.
Gross domestic product grew at its slowest pace in more than three years in the second quarter, held back by a prolonged property downturn and soft consumer demand.
Shaun Rein, managing director at China Market Research Group, expects further selling pressure from geopolitical uncertainty, concerns about an artificial intelligence bubble and deteriorating consumer confidence.
Rein said China's large retail-investor base could amplify volatility, since individual investors may exit equities more quickly in uncertain periods.
HSBC data show retail investors account for 90% of daily trading in China, versus roughly 20% to 25% of volume on major markets such as the New York Stock Exchange.
He said Chinese investors are increasingly focused on preserving wealth as property-market weakness and sluggish labor conditions create uncertainty.
Rein argued the market's decline has gone too far, citing resilient exports and signs of a recovery in property prices in China's largest cities.
"It's a crisis of confidence right now not a crisis in the economy," he said, predicting a strong rebound in Chinese equities in 2027 despite more near-term selling.
Daniel Gerard, senior multi-asset strategist at State Street Markets, pointed to China's expanding artificial intelligence capabilities as a possible longer-term support for the market.
He said those advances could eventually draw international investors back to Chinese equities, potentially before corporate earnings begin to recover.
