China Slams the Brakes on the AI Money Rush as $7 Trillion Vanishes in Asia 🧠

Xiao Yuanqi, vice head of China’s National Financial Regulatory Administration, warned on Tuesday that global capital is flowing into artificial intelligence too quickly, creating a “crowding-out effect” that threatens traditional industries, credit stability and financial markets. Speaking in Hong Kong at the Hong Kong Monetary Authority’s Global Financial Leaders’ Summit, Xiao said heavy inflows into leading AI firms have fueled excessively rapid expansion, raising borrowing costs and weakening industries’ ability to reinvest and expand production. He urged policymakers to develop targeted frameworks for macroeconomic management and risk prevention.

The warning came as AI-heavy stocks declined across China, South Korea, Japan and Taiwan. China’s tech-focused STAR 50 index fell nearly -4% on Tuesday, reaching its lowest level since April 2025 and erasing the previous session’s gains, while the CSI 300 finished -0.2% lower. A market estimate placed the value wiped from AI-concentrated Asian markets at $7 trillion, including -$2.17 trillion in South Korea after a -40% decline in 4 months, -$3.01 trillion in China following a -16% drop in 6 months, and -$1.20 trillion in Japan after a -13.5% fall in over 4 months.

State-linked “national team” buying pushed ETF trading volumes to about 120 billion yuan ($18 billion), the highest level since late January. Beijing also expanded stock-buying facilities and introduced cheaper funding for share buybacks, but investor confidence remained fragile after the CSI 300’s sharp October drop amid concerns over economic growth and AI earnings.

At the summit, Chinese Vice Premier He Lifeng reaffirmed Beijing’s support for Hong Kong, describing the city as a key financial center and offshore yuan hub. He pledged to keep the external yuan circuit open, increase its liquidity and expand sovereign and corporate bond issuance in the currency.

Hong Kong Chief Executive John Lee also highlighted the city’s stability and competitiveness, pointing to commodities trading, digital assets and green bonds. Officials additionally noted progress on establishing a gold trading link with Shanghai.