摘要：In mainland financial discourse, there’s a widely shared but largely untested belief that a rising stock market can stimulate cons

李迅雷 系中泰国际首席经济学家、中国首席经济学家论坛副理事长

In mainland financial discourse, there’s a widely shared but largely untested belief that a rising stock market can stimulate consumption and help boost domestic demand. The logic is simple: rising stock prices fatten investor portfolios, leading to higher consumer spending, which in turn could reinvigorate economic recovery.

This idea has even made its way into official policy. For example, China’s recent planto “vigorously boost consumption” suggested measures such as “stabilising the stock market.”

However, this optimistic view faces a sharp critique from Li Xunlei, Chief Economist at Zhongtai Financial International Limited. Li has worked extensively at other Chinese securities banks, including Junan Securities, Guotai Junan Securities, and Haitong Securities. He is one of the most renowned chief economists among major domestic securities firms in China.

Li points to the glaring wealth inequality in China’s stock market, where 80% of retail investors on the Shanghai Stock Exchange control a mere 3.2% of its total value, while the top 3% of investors hold over 60% of the wealth.

Moreover, Li argues that rising stock prices are unlikely to impact most households, whose wealth is overwhelmingly tied to real estate rather than equities.

In light of this, Li dismisses the idea of using the stock market as a consumption engine. If anything, the stock market’s volatility and wealth polarisation should highlight the need for long-term measures, such as increasing fiscal spending in the public welfare sector and persistently advancing fiscal and tax reforms to raise the income levels of low- and middle-income groups.

Rethinking the “Consensus” on Capital Markets: Can a Rising Stock Market Really Boost Consumption?（Li Xunlei ）

Over the past three decades, China’s A-share market has grown into the world’s second-largest in terms of market capitalisation. Yet it has often been criticised for functioning well as a financing platform while falling short in delivering returns to investors. As a result, a policy consensus has emerged: moving forward, the focus should shift toward enhancing the market’s investment function while downplaying its financing role.

On the financing front, this has led to a policy call for “strict regulation on the entry into the stock market through securities issuance and listing and accelerating the establishment of a normalised mechanism for delisting unqualified companies.” In light of persistent volatility and declining valuations in the A-share market, another consensus has formed around “guiding more medium- and long-term capital into the market” to increase the share of patient capital, thereby promoting stable performance with good momentum for growth. Another policy consensus argues that a rising stock market could help stimulate consumer spending.

This article seeks to critically reexamine the prevailing views and present an alternative perspective. As I see it, the various problems in the A-share market are to be expected in an emerging market context. However, policy responses have tended to be superficial, overlooking the deeper structural causes behind surface-level phenomena. I have therefore begun a series of reports to explore these issues in depth. This is the second instalment, focusing on the question: Can a rising stock market truly boost consumption?

The A-share Market: A Small and Highly Polarized Retail Investor Base

Just how many retail investors are there in China’s A-share market? The exact figure is hard to pin down. While trading account numbers can provide a rough estimate, they are complicated by duplicate accounts across the Shanghai, Shenzhen, and Beijing stock exchanges—many individuals hold multiple accounts. Moreover, a significant share of these accounts are inactive or “empty” (i.e., with no funds deposited), making account numbers an unreliable indicator of actual investor participation.

Former Chairman of the China Securities Regulatory Commission (CSRC), Yi Huiman, noted at the 2022 Financial Street Forum that “the number of retail investors exceeds 200 million.” Assuming a modest 10% increase over the past two years—given the market’s relatively subdued activity—the current number of retail investors likely stands at around 220 million, or roughly 15.6% of China’s total population. This estimate aligns with a media interview on January 24, 2025, in which CSRC Vice Chairman Wang Jianjun stated that “China’s stock market has 220 million investors.”

In addition to direct retail investors, the A-share market also includes a vast number of indirect participants who invest through mutual funds. According to data from the Asset Management Association of China (AMAC), the number of mutual fund holders reached 759 million by the end of June 2024—a relatively large figure. However, a CSRC press conference held on January 12, 2024, revealed that as of the end of 2023, public mutual funds held RMB 5.1 trillion in A-share free-float market capitalization, accounting for only 7.3% of the public float. The average holding per capita was less than 7,000 yuan [$965.6], with the median figure even lower.

The breakdown of investor wealth further highlights the disparity. By the end of 2023, 80% of retail investor accounts on the Shanghai Stock Exchange held less than RMB 500,000 and accounted for just 3.2% of total market value—representing only 13.8% of total retail investor holdings. Meanwhile, accounts with over RMB 3 million made up only 3% of investors but held 14.5% of the market’s value—more than 60% of total retail investor holdings. The most extreme concentration: accounts with over RMB 10 million, representing just 0.74% of investors, controlled 11.3% of the market’s total value.

Investor Holding Structure on the Shanghai Stock Exchange at the End of 2023. Data source: Shanghai Stock Exchange, Zhongtai Securities Institute

The structure of investors in the A-share market mirrors the wealth distribution within China’s household sector. This wealth disparity is even more pronounced than the distribution of disposable income across households. For instance, the top 20% of households by disposable income account for 46% of total disposable income. In comparison, the top 3% of retail investors on the Shanghai Stock Exchange hold more than 60% of the total market value owned by retail investors.

Disposable Income Distribution Among Different Income Groups in China. Data source: National Bureau of Statistics of China, Zhongtai Securities Institute

In the meantime, 80% of individual investors on the Shanghai Stock Exchange hold stocks that account for only 13.8% of the total market value held by all retail investors. In contrast, the bottom 80% of households by disposable income in China account for 54% of total disposable income.

In summary, the data provided by the Shanghai Stock Exchange clearly shows that stock market fluctuations have a more significant impact on the absolute wealth of the top 20% of individual investors, who hold stock and cash worth over 500,000 yuan [$68,972].

The Household Sector Holds a Low Proportion of Equity Assets

Assuming each of the 220 million retail investors corresponds to a three-person household, this would imply that approximately 660 million people in China’s household sector are at least somewhat involved in holding stock-related assets. Including the 759 million mutual fund investors, the total number of direct and indirect participants in the A-share market is exceptionally large, indicating that stock market investment has essentially become a nationwide activity.

However, data from multiple surveys indicate that the proportion of equity assets within Chinese households’ total assets remains relatively low.

For instance, a conclusion from the article “2019 Survey on the Assets and Liabilities of Urban Households in China”, published in China Finance, a magazine run by the People’s Bank of China (PBOC), reveals that the average total asset value of urban households in China was 3.179 million yuan, with physical assets making up the majority—2.530 million yuan [$349,001], accounting for 80% of total household assets. Financial assets only accounted for 20% of total assets. Among financial assets, stocks and mutual funds together made up just 10%. Given the relatively low proportion of equity funds, stocks constitute less than 2% of the total assets of urban households. The proportion is likely even lower among rural households.

Household asset structure. Data source: “2019 Survey on the Assets and Liabilities of Urban Households in China” published in China Finance, Zhongtai Securities Institute

Although stocks make up only 6.4% of the financial assets of urban households, equity assets are also present to varying degrees in fund, insurance, bank wealth management, and asset management trust products. It is difficult to estimate the exact figures, but this does not change the conclusion that the proportion of equity assets in urban household financial assets remains below 2%.

Structure of Urban Households’ Financial Assets. Data source: “2019 Survey on the Assets and Liabilities of Urban Households in China”published inChina Finance, Zhongtai Securities Institute

Expanding the scope to both urban and rural populations, the proportion of equity assets in the total assets of Chinese households should be even lower. Currently, China’s urbanisation rate stands at 65%, and the proportion of equity assets held by rural households in total household assets is expected to be lower than that of urban households. Five years have now passed since 2019, and the proportion of equity assets in household portfolios should have increased. This is particularly true after the real estate market peaked in 2021, followed by a decline in property prices. As a result, the share of real estate in household assets likely decreased significantly, leading to a notable increase in the proportion of financial assets.

Among financial assets, the balance of bank deposits in the household sector has increased significantly, from 82 trillion yuan [$11.2 trillion] in 2019 to 150 trillion yuan [$20.6 trillion] today. The scale of bond assets has also grown substantially, leading to an “asset shortage.” By the end of the first half of 2024, the total scale of the bond market reached 165 trillion [$22.7 trillion] yuan, indicating a decrease in investors’ risk appetite, with bond prices rising and stock prices falling.

When comparing the asset structures of household assets in major global economies, it is found that in the United States, about 30% of household assets are allocated to stocks, in Australia about 15%, and in Taiwan about 18%. Households in Japan and the UK have lower allocations, around 7-8%, yet they are still higher than China’s.

The above analysis aims to demonstrate that stock market fluctuations have a minimal impact on the wealth or income of the vast majority of households in China, a country with a population of 1.41 billion. This conclusion is supported by two perspectives: the low proportion of equity assets in household portfolios and the high concentration of wealth among individual investors in the stock market.

Likely No Correlation Between Total Retail Sales of Consumer Goods and Stock Market Fluctuations

It is common to associate the level of consumption with stock market performance, and the logic appears straightforward: when the stock market is making money, consumer confidence increases, promoting consumption upgrades; conversely, when the stock market is losing money, people tend to cut back on spending.

To determine whether there is a correlation between stock market fluctuations and consumption, a scatter plot was created comparing the changes in the total retail sales of consumer goods with the performance of the CSI 300 index.

The data sample spans from February 2011 to October 2024. The changes in the CSI 300 index over the past month, three months, six months, and one year were compared with the month-on-month growth rate of total retail sales of consumer goods (seasonally adjusted) for the following month.

CSI 300 Index Fluctuations and Month-on-Month Changes in Total Retail Sales of Consumer Goods. Data source: WIND, Zhongtai Securities Institute

The data points where the month-on-month growth rate of total retail sales of consumer goods (seasonally adjusted) fluctuated by more than 3% have been excluded from the scatter plot. From the four graphs above, it is evident that there is no significant correlation between the fluctuations in the month-on-month growth rate of retail sales and the performance of the CSI 300 index.

So, why do people generally believe that a rising stock market benefits consumption? This may be due to the relatively small sample size of the observations. There is a common saying in public discourse about investing in the stock market: “10% make a profit, 20% break even, and 70% lose.” Since 70% of investors lose money, why has consumption continued to upgrade in China before 2021? The reason is that approximately 60% of the assets of Chinese households are in real estate, and from 2000 to 2021, the real estate market experienced a long-term upward cycle lasting over 20 years.

After the second half of 2021, the real estate market entered a long-term downturn, marking an economic downcycle that China had never experienced since 1978, unrelated to the long-term effects of the pandemic. This explains why many economic indicators have not yet returned to pre-pandemic levels.

The year 2021 was likely a turning point for many economic indicators in China, and the stock market was no exception. In the first quarter of 2021, the earnings growth rate of A-share listed companies peaked, but then it began to decline persistently. By the third quarter of 2024, the year-on-year growth rate of revenue was -0.91%, a decrease of 0.32 percentage points from the second quarter. The year-on-year growth rate of net profit attributable to the parent company was -0.52%. From this perspective, there has been no market failure in the A-share market.

Year-on-Year Growth Rate of Net Profit Attributable to Parent Company for Listed Companies. Data source: WIND, Zhongtai Securities Institute

Therefore, the failure of consumption growth to return to pre-pandemic levels is more closely related to the weakening of the real estate market, as real estate accounts for a higher portion of household assets. At the same time, the downturn in real estate has a negative impact on more than 20 domestic industries and more seriously exacerbates the debt situation of local governments.

Of course, for the first-tier cities of Beijing, Shanghai, and Shenzhen—where the financial sector is prominent and wealthy populations are concentrated—stock market fluctuations do have an effect on consumption. From January to October, the year-on-year growth rate of total retail sales of consumer goods in Beijing declined by 1.3% and in Shanghai by 2%. Shenzhen has yet to release October data, but the first three quarters showed a 0.7% decrease, which is below the national average of 3.3%.

As clearly shown in the chart below, the growth rate of net property income in the disposable income of Chinese households has been on a downward trend since it peaked in March 2021, declining from 17% to 2.1% in June of this year.

Changes in the Growth Rate of Per Capita Net Property Income for Chinese Households. Data source: WIND, Zhongtai Securities Institute

Why is retail sales data so poor in first-tier cities? A partial explanation may lie in the decline in the growth rate of net property income per capita. First-tier cities have a higher proportion of high-net-worth individuals, and financial assets make up a larger share of household portfolios. Therefore, in a context where both the real estate and stock markets are sluggish, the decline in property income growth has a more significant negative impact on consumption in first-tier cities than in third- and fourth-tier cities.

Since the main consumers are middle- and low-income groups, which make up 60% of the population, and the primary holders of financial assets are high- and middle-high-income groups, who account for 40% of the population, there is a clear divide. High-asset, highly educated households are more likely to participate in risky financial markets, while the opposite is true for lower-income groups. As a result, the main holders of risky financial assets (such as stocks) do not belong to the same demographic as the primary consumers. Therefore, an improvement in the stock market cannot significantly boost overall national consumption.

The Effect of A-Shares on Income Redistribution — Likely More Detrimental Than Beneficial for Promoting Consumption

According to data released at the CSRC press conference on January 12, 2024, the average dividend yield of listed companies in the Shanghai and Shenzhen stock markets in 2023 reached 3.04%, placing it above the average level compared to major global stock markets. Among these companies, 243 implemented interim dividends, marking a year-on-year increase of 54.78%.

Comparing dividend yields internationally in 2023, the Hang Seng Index stood at 4.0%, the CSI 300 at 3.0%, the S&P 500 at 1.2%, and the Nasdaq Index at 0.7%. In the context of low inflation, the dividend yield of A-shares is indeed attractive. However, why do most retail investors complain about losing money in the stock market? Moreover, the saying “10% make a profit, 20% break even, and 70% lose” has become deeply ingrained.

An estimate of the transaction costs for retail investors in the A-share market in 2023 shows that, assuming retail investors accounted for 60-70% of total market transactions (data from the regulator suggests that retail investors’ share of A-share transactions hit a record low of 61.35% in the first three quarters of 2022), it is estimated that individual investors’ total commission and stamp duty expenses in 2023 ranged between 53.6 billion yuan [$7.3 billion] and 100 billion yuan [$13.7 billion]. By the distribution date, the total cash dividend of listed companies in 2023 amounted to 2.13 trillion yuan. Assuming that the proportion of dividends received by retail investors in the entire market is consistent with that of the Shanghai Stock Exchange, retail investors are estimated to have received a net after-tax dividend income of 262 billion [$36 billion] to 327.7 billion yuan [$45 billion] (personal income tax rates range from 0% to 20% based on holding period, with tax exemptions for holdings longer than one year).

It is clear that, from the perspective of dividend payouts, investors in the A-share market can still achieve positive returns. However, why are there always more investors losing money than making a profit? The key lies in the continuous decline in the overall valuation level of the A-share market and the frequent trading by retail investors. Stock market income comes from two sources: one is dividend income, which has significantly increased in recent years; the other is capital gains, where most individual investors incur losses.

Annual turnover rates of major global stock markets (from January 2022 to September 2024). Data source: WIND, Zhongtai Securities Institute

By comparing the annualized turnover rate of the CSI 300 index stocks from the beginning of 2022 to the end of the third quarter of 2024 with the corresponding annualised turnover rates of major global indices during the same period, it is found that the annualised turnover rate of the CSI 300 is nearly 300%. The S&P 500 has a turnover rate of 178%, and the Nasdaq Index has a turnover rate of 153%. In contrast, the annualized turnover rate of the Nikkei 225, which has performed well in the past three years, is only 100%.

In recent years, retail investors have held about 30% of the free-float market capitalisation of A-shares, yet their share of total trading volume exceeds 60% (over 80% before 2016). I believe the root cause of most retail investors’ negative capital gains lies in excessively frequent trading, differences in cognitive levels, and information asymmetry. Greed and fear are common human weaknesses, and excessive trading often leads to chasing hype stocks and panic selling.

The following empirical study fully supports my judgment: “Wealth Redistribution in Bubbles and Crashes” (published in the Journal of Monetary Economics in 2022, by Li An Li, Dong Lou, and Donghui Shi).

The authors obtained daily holdings and transaction records for approximately 40 million investor accounts from the Shanghai Stock Exchange, with the sample period covering July 2014 to December 2015. The investor accounts were categorised into three types: those owned by households, institutions, and corporations. The corporate category includes holdings by both private firms and government-sponsored entities. Corporate accounts represent 64% of the market value but only 2% of the total trading volume. Institutional accounts hold 11% of the market value and account for 12% of the trading volume. Retail investors hold less than 25% of the market value but account for nearly 90% of the trading volume.

Based on portfolio value (including equity holdings in both Shanghai and Shenzhen exchanges, as well as cash) before the bubble period, the authors further categorised household accounts into one of the following five wealth groups: 0-500,000 yuan (WG1), 500,000-3,000,000 yuan (WG2), 3,000,000-10,000,000 yuan (WG3), and over 10,000,000 yuan (WG4). These groups account for 85%, 12.5%, 2%, and 0.5% of the total accounts, respectively. However, there were no significant differences in average capital weight or trading volume share between these four groups.

After the market peak on June 12, 2015, the wealthiest retail investors quickly exited the stock market, selling their holdings to other retail investors and corporate accounts. During the bubble burst from June to December 2015, the cumulative capital outflows for the four groups of individual investors were -32 billion yuan, -137 billion yuan, -196 billion yuan, and -473 billion yuan, respectively. The final conclusion was that the cumulative profits and losses for the four groups of retail investors were -250 billion yuan, -42 billion yuan, 44 billion yuan, and 254 billion yuan, respectively. In other words, the bottom 85% of retail investors, who adopted an active investment strategy, lost 250 billion yuan, while the top 0.5% of retail investors earned 254 billion yuan.

The conclusion of this study is thought-provoking: only 2.5% of high-net-worth investors profited during this round of market fluctuations, while approximately 250 billion yuan of funds were lost by the 85% of ordinary investors and earned by the 0.5% of high-net-worth investors. Although this study focuses on the unique case of the stock market’s abnormal fluctuations in 2014-2015, the ongoing decline in A-shares’ valuation over the past 30 years has made it exceedingly difficult for most investors to achieve capital gains. The pattern of a few individuals profiting while the majority incur losses has remained unchanged.

The differences in investment skills (including stock picking and timing) and access to information among retail investors with varying levels of wealth are important factors contributing to the worsening wealth inequality in equity investments.

Despite the hopes of both regulators and ordinary investors that a strong stock market could increase property income for everyone, and despite efforts in legislation, strengthening regulation, controlling financing scale and pace, and other measures to protect the interests of small and medium-sized investors, the A-share market, as an emerging market, still faces significant disparities in the knowledge and investment skills of market participants. The overall governance of listed companies also needs improvement. Therefore, expecting a rising stock market to generally increase the property income of the broad public is merely an idealistic wish, and there is a large gap between this ideal and reality.

An even more obvious fact is that the idea of using a bull market in stocks to stimulate consumption is completely unrealistic. The stock market is a barometer of the economy—only a strong economy can support a strong stock market. One cannot hope to drive consumption or rely on the stock market to propel economic growth. Stimulating consumption fundamentally requires long-term measures, such as increasing fiscal spending in the public welfare sector and persistently advancing fiscal and tax reforms to raise the income levels of low- and middle-income groups.

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来源：首席经济学家论坛一点号