Chinese stocks closed higher on Monday, with the Shanghai benchmark index closing at its highest point in nearly a decade on August 18 and the market capitalization of A-share listed companies surpassing 100 trillion yuan ($13.92 billion) for the first time during the session. Photo: VCG

Chinese stocks closed higher on Monday, with the Shanghai benchmark index closing at its highest point in nearly a decade on Monday and the market capitalization of A-share listed companies surpassing 100 trillion yuan ($13.92 billion) for the first time during the session. Chinese analysts said the performance highlighted the effectiveness of government policies aimed at stabilizing the capital market and innovation-driven growth. 

The steady growth of the Chinese capital market is also based on rising confidence among investors on back of the resilient performance of the Chinese economy, which grew 5.3 percent in the first half, they said.

The benchmark Shanghai Composite Index was up 0.85 percent at 3,728.03 points after hitting an intra-day high of 3,745.94 points, its highest level since August 2015 and marking a near-decade high.

The Shenzhen Component Index closed 1.73 percent higher at 11,835.57 points.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, gained 2.84 percent to close at 2,606.2 points.

More than 4,000 stocks gained on Monday, with brokerages, fintech firms, artificial intelligence (AI)-hardware, rare-earth magnets and films leading the gain.

Analysts noted that the rally, which took off at the beginning of the year, has been driven by China's sustained efforts in promoting sci-tech innovation in recent years, with tech shares and innovative companies leading the momentum.

Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Monday that the recovery of the Chinese A-share market is rooted in a profound change of outlook by domestic and global investors on the Chinese economy, which has fared well despite external pressure including trade conflicts with the US and domestic challenges so far this year.

"Such a change in growth outlook is coupled with the Chinese government's continued supportive policies in bolstering consumption and investment, policies by the market regulator and the central bank aimed at ensuring the sound development of the capital market, and an innate demand for the recovery of the A-share market, which has had unreasonably low levels of valuation for a long time," Xi Junyang said.

"The milestone seen on Monday is a demonstration of the ongoing economic recovery, with more optimistic opinions on the growth potential of the Chinese capital market converging into a mainstream consensus," Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Monday.

Recently announced supportive policies, including the plan to provide interest subsidies for qualifying personal consumption loans in the latest effort to boost consumption, have further consolidated that consensus, Dong noted.

Foreign capital is also increasingly looking at the Chinese market in a positive light, backed by China's resilient market performance in the first half of 2025.

In February, Deutsche Bank analyst Peter Milliken wrote in a note that Chinese stock gauges would top prior highs in the medium term as the world wakes up to the competitiveness of its companies, led by catalysts such as the AI product DeepSeek and innovation in electric vehicles, Bloomberg reported earlier.

In the following months, multiple international investment banks expressed optimism about China's development opportunities, upgrading the rating of Chinese assets from neutral to overweight.

From January to June, net foreign direct investment into Chinese equities and mutual funds reached $10.1 billion, reversing the net reduction trend of the previous two years. Notably, in May and June, the net increase in holdings reached $18.8 billion, indicating a stronger willingness of global capital to increase allocations to the domestic stock market, Jia Ning, an official of the State Administration of Foreign Exchange, said in July.

Jia noted that this year, foreign investment in yuan assets has generally remained stable. Foreign holdings of domestic yuan bonds now exceed $600 billion, a record high.

This positive outlook is underpinned by the country's accelerating industrial transformation and structural upgrades, with notable progress in technological innovation driving substantial growth potential in emerging sectors, analysts said.

Yang Delong, chief economist of the Shenzhen-based First Seafront Fund, told the Global Times on Monday that as expectations improved, more residents' deposits flowed into the capital market in July, on top of inflows by industrial capital and foreign capital.

Yang said that consumption, finance and tech shares could lead growth in the medium term.