China’s Margin Debt Peaks as Investors Embrace Risk, Potentially Boosting Global Markets and BTC

Chinese Margin Debt Hits Record High, Global Markets See Risk-On Signals; Crypto Traders Cautious

Chinese investors have borrowed a record 2.28 trillion yuan ($320 billion) to buy local equities, highlighting strong risk-on sentiment in global markets. Yet, cryptocurrency traders remain measured in their approach.

According to Bloomberg, China’s onshore margin trading has surpassed the previous peak of 2.27 trillion yuan set in 2015. Margin trading, which involves borrowing from brokers to purchase stocks, reflects both investor confidence and appetite for risk.

Equities have surged alongside the record debt. The Shanghai Composite Index has climbed 15% year-to-date, outpacing the S&P 500’s roughly 10% gain, while the broader CSI 300 Index is up 14%.

Data tracker MacroMicro notes 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 said, adding that the current rally is broader and more measured, supported by a larger deposit base and wider sector participation beyond AI and chip stocks.

However, deflationary pressures persist, with forward earnings down 2.5%. This makes leveraged positions riskier, and any sharp unwind of margin debt could trigger volatility with potential spillover effects for global markets.

Crypto Traders Exercise Caution
In contrast, crypto markets are showing moderate risk appetite. Funding rates, often used to gauge leverage demand, sit between 5% and 10% for the top 25 cryptocurrencies. This indicates that while traders are taking leveraged long positions, they are balancing optimism with risk management.