Shanghai index hits 10-year high on policy momentum

China's major stock indexes advanced on Thursday, with the Shanghai Composite Index reaching its highest level in over a decade, fueled by growing investor confidence in policy support and expectations that a new technology cycle will underpin China's next phase of growth.

The Shanghai Composite Index surged past the 3,900-point mark to close at 3,933.97, up 1.32 percent. The Shenzhen Component Index rose 1.47 percent to 13,725.56, while the ChiNext Index, which tracks China's Nasdaq-style board of growth enterprises, gained 0.73 percent to touch 3,261.82.

Economist Ren Zeping said in an article on Wednesday that the market rise has been driven by stronger-than-expected macro policy easing, abundant liquidity and rapid advances in sectors such as artificial intelligence, semiconductors, robotics and innovative drugs.

Ren noted that since last September, authorities have rolled out a series of measures, including interest rate and reserve requirement ratio cuts, a 10 trillion yuan ($1.4 trillion) debt resolution plan and relaxed property curbs, signaling continued macro policy easing. "This round of the bull market is confidence-driven," Ren said. "Policies have far exceeded expectations, restoring confidence in China's assets and economic outlook."

He emphasized that "we are still in a phase of macro policy easing".

A People's Daily opinion piece this week also struck an upbeat tone, stating that the economy has performed better than expected this year, with stability in growth, prices, employment and balance of payments. The paper said that international investors are increasing exposure to Chinese assets as confidence strengthens with the renminbi remaining stable and stock markets trending upward.

Looking ahead, the article said that China still has tremendous potential for development in technology, labor and capital.

Brokerages echoed the sentiment. Industrial Securities, a Chinese securities firm headquartered in Fuzhou, Fujian province, said in a report that the A-share market has been gaining upward momentum after September's consolidation, supported by expectations from upcoming major policy meetings, including discussions on the 15th Five-Year Plan (2026-30).

Expectations of key policy moves will help refocus investor interest in growth opportunities and strengthen market consensus. "Risk appetite will likely have stronger anchors and tradeable structural themes will become more diverse," the report said.

DBS Bank investment strategist Zhu Xinghui wrote in a recent report that despite short-term volatility, China's equities remain in a long-term uptrend. Both the CSI 300 and Hang Seng Index, he noted, have entered an upward cycle since hitting cyclical lows in 2024. "The uptrend remains intact, and if supported by fundamentals, there's still room for further gains," Zhu said.

He added that industries tied to new quality productive forces, such as AI, quantum computing, biomanufacturing and robotics, were likely to continue to benefit from policy support as the country pivots toward innovation-led growth.

This year marks the final year of the 14th Five-Year Plan (2021-25), with the 15th Five-Year Plan blueprint to be formulated in October and reviewed at the two sessions in March 2026.

Zhang Ning, senior China economist at UBS Investment Bank, said in a report on Monday that the new five-year plan may help clarify strategic goals and core principles of China's anti-involution campaign, highlighting building a "unified national market", curbing irresponsible local government investment, and boosting local consumption.

"We think fostering high-quality growth will likely be the top priority over the next decade, mainly driven by innovation and total factor productivity growth," Zhang said. "The target for R&D spending growth may again be set above a 7 percent compound annual rate, with its share in GDP expected to rise from 2.7 percent in 2024 to 3.2 percent in 2030. China will likely continue to support basic and frontier research and address technological bottlenecks to achieve greater self-sufficiency."