Record loans drive Chinese stock rally as crypto remains cautious

Chinese investors are borrowing unprecedented amounts to buy local stocks, signaling a renewed appetite for risk in global markets. However, cryptocurrency traders are taking a “wait and see” approach, as leverage on mainland China's exchanges reaches levels not seen since 2015.

According to Bloomberg, outstanding margin trades in the Chinese stock market reached 2.28 trillion yuan (320.000 million dollars) on Monday, surpassing the previous peak of 2.27 trillion set during the stock market frenzy of 2015.

Margin trading, which allows investors to borrow from brokers to buy securities, is used in markets as an indicator of confidence and risk appetite.

Gains in the Chinese market driven by liquidity winds

According to data from Trading Economics, the CSI 300 index gained 10% in August, its strongest monthly advance since September 2023. The Shanghai Composite Index has risen 15% this year, surpassing the approximately 10% advance of the S&P 500, while the CSI 300 has added 14%.

Bloomberg economists believe that this rebound has been caused by low interest rates, moderate bond yields, and a lack of attractive investment alternatives within China.

Caution among cryptocurrency operators despite the stock market rally

The bullish trend in stock market leverage has not yet translated into aggressive behavior in the cryptocurrency markets. Currently, the financing rates for the top 25 cryptocurrencies range between 5% and 10%, indicating a moderate bullish sentiment.

Meanwhile, the crypto fear and greed index shows a neutral signal at 49, and market participants seem to avoid the excesses seen in stocks.

Seasonal factors could also be moderating enthusiasm. Data from CoinGlass shows that Bitcoin has fallen in eight of the last 12 Septembers.

Will there be an economic backing?

Some analysts warn that current conditions differ from those of the last wave of marginal debt. The research platform MacroMicro noted that the new record occurs in a context of slow economic growth, in contrast to 2015 when GDP expansion was deeper.

“CSI 300 at decade highs. Borrowed money chasing stocks in a contracting economy,” the firm posted on X, adding that this rally seems more moderate, with participation beyond technology and chips, supported by a large deposit base.

The rally in China has taken place in a context of decreasing trade tensions with the United States. But for some economists, the limited investment options in the country have forced households and institutions to buy out more stocks.

“Households and institutions in China don't have many options,” said Shujin Chen, China economist at Jefferies. “A-shares have joined the global party.”

The appreciation of the renminbi sends signals

According to Financial Times, the Chinese coin has appreciated by 2.3% to 7.14 yuan per dollar in 2025, after several years of weakness against the dollar.

Mitul Kotecha, head of currency and markets strategy at Barclays, said that appreciation can have diplomatic weight. “It's sending a signal to the U.S. China wants to show, at least in good faith, that they are not going to devalue their coin.”

However, compared to other major currencies, the performance of the renminbi has lagged behind. The euro has gained 13.2% and the yen 6.2% against the dollar this year.

“It seems very likely that U.S. officials have discussed this issue and encouraged countries to allow their coins to appreciate,” said Andrew Tilton, chief economist for Asia-Pacific at Goldman Sachs.