· 2 min read
illuminem summarises for you the essential news of the day. Read the full piece on The Economist or enjoy below:
🗞️ Driving the news: Despite persistent economic challenges, China’s Shanghai Composite Index surged to a 10-year high on August 25th, marking a 36% increase since the beginning of 2025
• This performance outpaces both the S&P 500 and other major global indices, in a striking reversal of typical trends for Chinese equities, which have long lagged behind international markets
🔭 The context: Historically, Chinese investors have sought returns abroad, often navigating around capital controls due to underwhelming domestic stock performance
• However, 2025 has seen an unusual uptick in domestic investor confidence amid government efforts to stabilise markets and support select industries
• While GDP growth remains sluggish and consumer sentiment weak, stock gains appear driven more by policy signals and speculative momentum than underlying fundamentals
🌍 Why it matters for the planet: China’s equity market movements influence global capital allocation and signal investor sentiment toward the world’s second-largest economy, a key player in global sustainability transitions
• A strong domestic market could support green industrial policies, but if the rally is decoupled from real economic recovery, it risks fuelling volatility and misallocation of capital, including in renewable and climate tech sectors
⏭️ What's next: Investors and policymakers will watch closely to see if the rally sustains or unravels under economic pressure
• The Chinese government may leverage market strength to accelerate structural reforms or green investment pledges, particularly ahead of the next Five-Year Plan cycle
• However, without clearer signs of broader economic recovery, the rally remains vulnerable to shifts in sentiment or policy tightening
💬 One quote: “China’s stock rally reflects hope, not fundamentals. Investors are betting on policy support, not profits.” — Alicia García Herrero, Chief Economist for Asia-Pacific, Natixis
📈 One stat: +36% — The year-to-date rise of the Shanghai Composite Index as of August 25, 2025, its highest level in a decade
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