Despite mainland stocks putting up a solid Q1—the CSI 300 Index gained 3.1% for the quarter—and although macro fundamentals appeared as if they might be turning a corner at the start of 2024, bullish sentiment toward China equities had yet to materialize, with many questioning whether a first-quarter rebound would sustain. In the commentary below, Dr. Phillip Wool, Global Head of Research of Rayliant Global Advisors, delves into the details of China’s economy and market action during Q1, discussing how Beijing’s plan to nurture high-quality growth might translate to macro conditions and investors’ portfolios.

After finishing Q2 as the only emerging market in positive territory, the effects of zero-COVID policy, a continued slump in the property market, and weakening global demand pushed Chinese stocks to the bottom of the EM index in Q3. The CSI 300 Index dropped by -14.3% over the three months from July to September 2022. Below, we offer deeper insights into third-quarter performance—including some bright spots among state-owned enterprises and technology with a policy tailwind—along with our thinking on October’s National Congress and what the rest of the year might have in store.