China’s Stock Market Is Trailing the U.S. by the Widest Margin in History

The gap between U.S. and Chinese stocks just broke a record stretching back decades, and Beijing's state-backed funds are still sitting on their hands while blue-chip shares slide into bear market territory.

When trading ended on Thursday, October 22, the S&P 500 closed at 2.095 times the Shanghai Composite. By our calculation from daily closes, that is the highest ratio in the data going back to 1997, exceeding the 2.088 record set on September 19, 2024.

The S&P 500’s ratio to Hong Kong’s Hang Seng also closed at a record 0.334, in data back to 1990. Both ratios fell Friday to 2.066 and 0.330 as Shanghai rallied. Even so, the gap hit the widest margin on record during the week ended October 23.

Investors must judge whether China is a value trap. It could be a market that looks cheap but keeps falling, or a deep discount that Beijing’s state funds have only started to buy.

Through October 23, the S&P 500 has gained 11.4% in 2026. Over the same stretch, the Shanghai Composite fell 7.0%, and the Hang Seng fell 9.9%.

By our calculation, the S&P 500 is ahead of Shanghai by about 18 percentage points and ahead of MCHI by about 30 points, since MCHI is down 18.4%. The record shows up in the cumulative ratio, which captures years of difference, rather than in any single year.

The CSI 300, China’s blue-chip index, fell 1.8% to 4,036.30, its lowest close since July 2025. It entered a bear market Thursday, finishing 20.2% below its June 22 closing peak. The Shanghai Composite dropped 1.5% to its lowest level in more than a year, and the Hang Seng Tech index hit a two-year low.

Alibaba Group (NYSE:BABA | BABA Price Prediction) fell more than 6% and Tencent fell 2.9%. Investors doubted that AI growth and valuations could last. They were let down by Beijing’s incremental stimulus and pulled back after Beijing moved to tax offshore trusts held by shareholders of Hong Kong-listed Chinese companies.

“The market is in the dump,” said Hao Hong, CIO at Lotus Asset Management. He added that the National Team, the state-backed funds that buy shares to steady prices, “has been rather hesitant to make a move.”

On Friday, heavy trading in ETFs preferred by state-backed investors lifted the CSI 300 1.7% and the Shanghai Composite 0.9%. The CSI 300 still lost 1.6% for the week. That was its 11th straight weekly decline, the longest losing streak since the index was created in 2005, and it ended about 19% below its June peak.

Morgan Stanley analysts spoke. They said, “weak domestic demand and liquidity headwinds persist, while valuations have yet to reach an outright bottom.” The S&P 500 dropped 0.52% Friday, which means the record gap came from China falling while U.S. stocks also dropped.

The KraneShares CSI China Internet ETF (NYSEARCA:KWEB) fell 0.30% Friday to $23.14 and lost about 5.2% for the week. It is down 32.0% in 2026, and its one-year total return is -37.79%, because a fund made up only of internet stocks takes the most damage when AI and tech valuations are the worry.