Surging Margin Debt in China Signals Heightened Risk Appetite Across Markets and Bitcoin

Chinese Margin Debt Hits Record, Global Markets Eye Risk-On Momentum as Crypto Stays Cautious

Chinese investors have borrowed a record 2.28 trillion yuan ($320 billion) to purchase local stocks, signaling strong risk-on sentiment across global markets, though cryptocurrency traders remain measured.

Bloomberg reports that China’s onshore margin debt surpassed the previous peak of 2.27 trillion yuan set in 2015. Margin trading, which involves borrowing funds from brokers to buy securities, reflects investor confidence and appetite for risk.

Equity markets have rallied alongside the record debt. The Shanghai Composite Index has gained 15% year-to-date, outpacing the S&P 500’s roughly 10% gain, while the broader CSI 300 Index has risen 14%.

However, MacroMicro highlights a key distinction from 2015: today’s record comes amid slower economic growth. “CSI 300 at decade highs. Borrowed money chasing stocks in a shrinking economy,” the firm noted, adding that the current rally is broader and more measured, with wider sector participation and a larger deposit base supporting the move.

Still, deflationary pressures persist, with forward earnings down 2.5%, making leveraged positions riskier. A sharp unwinding of margin debt could trigger volatility with potential spillover effects for global markets.

Crypto Markets Show Caution
In contrast, crypto traders are showing moderate risk appetite. Funding rates for the top 25 cryptocurrencies—used to gauge leveraged positions—hover between 5% and 10%, suggesting demand for long positions, but tempered by careful risk management.