Chinese equities extended their powerful rally on Tuesday, with the benchmark CSI 300 index climbing to its highest level since January 2022 and the Shanghai Composite rising to heights not seen in more than a decade. The surge came as Asian markets more broadly delivered what analysts are calling their best start to a calendar year on record.

The CSI 300, which tracks the largest companies listed in Shanghai and Shenzhen, advanced 1.6% to close at 4,764 points. The Shanghai Composite rose 1.5% to push above 4,050—its strongest level since July 2015, when China's stock market was in the midst of a spectacular boom that eventually ended in a dramatic crash.

AI Mania Powers the Rally

Technology and artificial intelligence-related stocks led the charge, with investors betting that Chinese companies are positioned to capture a significant share of the global AI buildout. The enthusiasm has intensified since DeepSeek, the Chinese AI startup, burst onto the global stage exactly one year ago with models that challenged assumptions about American dominance in artificial intelligence.

"The DeepSeek moment last January fundamentally changed how global investors think about Chinese tech," said Michael Wu, chief China strategist at Nomura. "We're now seeing the second-order effects as money flows into the entire AI supply chain in China."

Among Tuesday's biggest gainers:

  • East Money Information: +4.5%
  • Leo Group: +6.5%
  • GigaDevice Semiconductor: +1%
  • China Spacesat: +1.9%
  • China Satellite Communications: +9.3%

Geopolitical Risks Take a Back Seat

Notably, Chinese investors largely shrugged off the weekend's dramatic geopolitical developments, including the U.S. military operation in Venezuela that resulted in the capture of President Nicolás Maduro. While the action sent oil prices swinging and rattled some global markets, mainland Chinese stocks treated the news as largely irrelevant to their investment thesis.

"Chinese markets are increasingly trading on domestic factors—stimulus expectations, technology leadership, and consumer recovery. External geopolitical noise is being filtered out more effectively than in the past."

— James Liu, Head of China Research at HSBC Asset Management

Goldman Sees More Gains Ahead

Goldman Sachs analysts issued a research note Tuesday maintaining their bullish outlook on Chinese equities, though they cautioned that the pace of gains is likely to moderate from here.

"We expect the bull run to continue, but at a slower pace," Goldman's Asia equity strategy team wrote. "Valuations have recovered from extreme lows, but Chinese stocks remain attractively priced relative to historical averages and global peers."

The investment bank noted that the DeepSeek phenomenon triggered a fundamental re-rating of Chinese technology stocks, with companies from Alibaba to Tencent benefiting from renewed investor interest in China's AI capabilities.

Best-Ever Start for Asian Markets

Beyond China, the broader Asian market picture is equally striking. A gauge tracking emerging market equities hit back-to-back record highs this week, while regional benchmarks from Japan's Nikkei 225 to South Korea's Kospi posted strong gains.

The combination of factors driving Asian outperformance includes:

  • AI investment cycle: Asian semiconductor and technology companies are capturing significant spending from the global AI buildout
  • Currency tailwinds: A weaker U.S. dollar has improved returns for dollar-based investors in Asian assets
  • Valuation gap: Asian markets remain cheaper than U.S. equities on most metrics after years of underperformance
  • Policy support: Central banks across Asia have signaled continued accommodative monetary policy

The Shanghai Composite's Decade-Long Journey

For Chinese market veterans, the Shanghai Composite's return to decade-plus highs carries special significance. The index has been on a rollercoaster ride since its 2015 peak, when it briefly touched 5,178 before plunging more than 40% over the following months in a crash that wiped out trillions of dollars in market value.

The subsequent years brought more volatility: a stabilization followed by trade war fears in 2018-2019, the COVID crash and recovery in 2020, and then a brutal bear market through much of 2022-2024 as property sector troubles, regulatory crackdowns, and geopolitical tensions weighed on sentiment.

"To see the Shanghai Composite back at these levels after everything Chinese markets have been through over the past decade is remarkable," said Victoria Chen, portfolio manager at Matthews Asia. "It speaks to the resilience of China's economy and the depth of its capital markets."

Risks Remain

Despite the bullish momentum, analysts caution that significant risks remain for Chinese equities. The property sector continues to work through its debt overhang, consumer spending remains below pre-pandemic trends, and tensions with the United States over technology and trade show no signs of easing.

The Supreme Court's pending decision on President Trump's IEEPA tariff authority could also have implications for Chinese exporters, though the direct impact on China-focused stocks may be limited given existing tariff levels.

What Investors Should Watch

  • Policy signals: Any indication of additional stimulus from Beijing's annual "Two Sessions" meetings in March
  • Earnings season: Chinese technology companies will report fourth-quarter results in the coming weeks
  • Currency moves: The yuan's trajectory against the dollar could influence foreign investor flows
  • U.S.-China relations: Trade and technology policy developments in Washington

For now, though, the momentum belongs to the bulls. With Asian markets posting their best start to a year in recorded history, investors are betting that the region's long-awaited resurgence is finally here.