Opinion Leaders
Growth vs performance: the case of China
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Alexis Bienvenu
Fund Manager,
La Financière de l’Échiquier (LFDE)
Over the last 10 years, China’s average GDP growth has stood at 5.5% per annum. That of the United States is half that: 2.4%.
Yet the leading US large-cap index gained 255% over this period, compared with 72% for the MSCI China (in dollars), representing an annual increase of 15% versus 6%[1] !
China’s remarkable growth has therefore not automatically translated into stock market performance, despite the overwhelming global dominance of Chinese champions in their respective fields: BYD in electric vehicles, CATL in batteries, Huawei in telecoms equipment, not to mention their leading positions in rare earths, lithium, construction, e-commerce platforms (Alibaba), shipping (Cosco), electronics (Foxconn), oil (Sinopec), etc.
Why is there such a divergence between the country’s industrial successes and the performance of the indices? Three factors, in particular, can be identified.
The first lies in the very conception of the economy’s role. Broadly speaking, the Chinese regime is based on state capitalism where the primary objectives are geopolitical sovereignty and social stability[2] . In the United States, by contrast, value creation for non-state shareholders predominates. Stock market performance logically reflects this difference in priorities.
From a more cyclical perspective, the Chinese stock market has been suffering for several years from the lingering effects of the property crisis in which the country has been mired since 2021. Not only have major developers such as Evergrande collapsed, leading to a decline in construction and in banks’ ability to lend; but the fall in prices has also led to a negative wealth effect for households, which have had to curb their spending and increase their savings. In a country where property accounts for the bulk of household wealth, this has resulted in a profound loss of confidence among households and banks, holding back investment.
Finally, recent profit momentum is being undermined by the dichotomy that has emerged between the relative health of certain industrial sectors, such as materials or technology, and the sluggishness of consumption of goods and services. In recent months, profits in the former have been revised upwards, whilst expectations for domestic consumption have turned downwards[3] . As a result, the MSCI China Index, which is heavily weighted towards consumer- s and internet platforms such as Tencent and Alibaba, has significantly underperformed more domestically focused indices, such as the CSI 300, since the start of the year. The latter, which is more industry-focused, has been largely positive since1January[4] .
Following such stock market setbacks, despite sustained GDP growth, it might seem tempting to invest in the large, neglected stocks of the Chinese consumer sector. But whilst a recovery will certainly come eventually, it is not necessarily imminent. The property market is struggling to stabilise, particularly in medium-sized cities[5] . The revival of consumption, on the other hand, is a central objective of the 2026–2030 five-year plan. But whilst measures are being announced, they are geared towards the medium to long term. The aim is less to massively stimulate consumption than to reorient the entire Chinese model, which will inevitably take time.
In the short term, therefore, the dichotomy between economic growth and stock market performance in China could persist, at least in consumption-related sectors. It will certainly be a few years before the growth-performance link can be established. Until then, it is important to carefully distinguish between sectors that are fully benefiting from China’s still-impressive growth and those that will have to wait for the full realisation of the new Chinese consumption model.
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Disclaimers
This data and these opinions, as well as the sectors and securities mentioned, are provided for information purposes only and, as such, do not constitute an offer to buy or sell any security, nor do they constitute investment advice or financial analysis. The opinions are those of the author and do not in any way engage the liability of LFDE. Past performance is not indicative of future results.
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[1] Source: Bloomberg.
[2] “Party-State Capitalism in China”, M. Pearson, M. Rithmire, K. Tsai, Harvard Business School Working Paper 21-065 – November 2020
[3] BNP Paribas “China’s great production/consumption divergence”, William Bratton, 02.06.2026
[4] Year-to-date performance: +9.8% for the CSI 300, compared with -7.2% for the MSCI China as at 4 June 2026, in US dollars.
[5] Reuters: https://www.reuters.com/world/asia-pacific/china-new-home-prices-fall-slowest-monthly-pace-year-april-2026-05-18
