Eliza Wong
The Forum’s Key Message: Beyond Profits to Progress
The recent Phoenix Bay Area Financial Forum 2025 in Guangzhou served as a pivotal platform for dissecting China’s economic trajectory, with Hong Hao (洪灏), Managing Partner of Lianhua Asset Management Co., Ltd. (莲华资产管理有限公司), delivering a thought-provoking address that resonated deeply with institutional investors. His central thesis—that bull markets are not merely about financial gains but about rekindling the animal spirit within the market—challenges conventional wisdom and offers a fresh lens through which to view China’s equity landscape. This concept of animal spirit, often overshadowed by short-term profit motives, underscores a critical need for risk-taking to propel long-term innovation.
Executive Summary: Critical Takeaways for Market Participants
Hong Hao’s insights provide actionable guidance for navigating China’s equity markets. Below are the key implications:
- Bull markets serve as catalysts for awakening animal spirit, encouraging investors to embrace risk and drive economic advancement beyond superficial gains.
- Historical patterns suggest China experiences epic bull cycles every decade, highlighting opportunities for strategic positioning in sectors like technology and AI.
- The current lack of animal spirit in markets poses a threat to innovation, necessitating policy support and investor education to foster a culture of risk-taking.
- For global investors, understanding this dynamic is essential for capitalizing on China’s transition from incremental growth to transformative leaps, particularly in high-tech industries.
Redefining Bull Markets: More Than Monetary Gains
Hong Hao’s assertion that profit is the “most superficial” aspect of a bull market redirects focus toward its psychological and economic underpinnings. He emphasizes that a sustained rally alters public sentiment, shifting expectations from caution to optimism, which in turn fuels investment in ventures with higher risk-reward profiles. This awakening of animal spirit—a term coined by economist John Maynard Keynes to describe innate human impulses driving economic activity—becomes the engine for societal progress, as seen in China’s past bull cycles.
The Psychological Shift in Investor Behavior
When animal spirit is awakened, investors move from passive holdings to active exploration of emerging opportunities. For instance, during China’s 2014-2015 bull run, retail participation surged by over 40%, according to data from the China Securities Regulatory Commission (CSRC) (中国证监会), leading to increased funding for startups in renewable energy and e-commerce. This behavioral shift is crucial for breaking cycles of risk aversion that can stagnate markets.
Animal Spirit: The Missing Link in Modern Markets
Hong Hao pinpointed the absence of animal spirit as a dire concern, equating it to a market-wide reluctance to assume risk. He illustrated this with the example of Benjamin Franklin’s kite experiment—a leap of faith that advanced science—arguing that similar courage is needed today, especially in fields like artificial intelligence (AI). In China’s context, the government’s “Made in China 2025” initiative relies on such spirit to achieve technological self-sufficiency, yet investor hesitancy remains a hurdle.
Historical Precedents and Economic Implications
Data from the Shanghai Stock Exchange (SSE) (上海证券交易所) shows that periods of high animal spirit correlate with spikes in IPO activity and R&D investment. For example, the 2007 bull market saw a 25% increase in venture capital flowing into tech firms, contributing to breakthroughs in sectors like fintech. Conversely, risk aversion can lead to capital flight, as observed during the 2018 trade tensions, where foreign investment dipped by 15%.
China’s Decadal Bull Cycles: A Pattern of Epic Proportions
Hong Hao’s observation that China experiences “epic” bull markets every decade aligns with historical data, highlighting cycles like the 2007 surge driven by industrialization and the 2015 boom fueled by retail speculation. These phases consistently awaken animal spirit, prompting structural shifts—from manufacturing dominance to today’s AI-driven economy. Analysts at CICC (中金公司) project the next cycle could focus on green technology, with policy tailwinds from the 十四五规划 (14th Five-Year Plan).
Case Study: The AI Revolution and Animal Spirit
In AI, companies like SenseTime (商汤科技) have leveraged bull market optimism to secure funding for ambitious projects, yet Hong Hao warns that without animal spirit, such innovations might stall. A report by McKinsey & Company notes that China’s AI sector requires risk-tolerant capital to close the gap with global leaders, making bull markets a vital enabler.
Strategies for Harnessing Animal Spirit in Investment Portfolios
For investors, cultivating animal spirit involves diversifying into high-growth areas while managing volatility. Tools like the STAR Market (科创板) offer exposure to innovative firms, but success hinges on embracing uncertainty. Hong Hao advises a long-term view, citing examples like Tencent (腾讯控股), which weathered early risks to become a tech titan.
Practical Steps for Institutional Players
– Allocate 15-20% of portfolios to emerging sectors such as EVs and biotechnology, where animal spirit drives disruption.
– Monitor policy announcements from the National Development and Reform Commission (NDRC) (国家发展和改革委员会) for signals of supportive measures.
– Engage with forums like the Phoenix Bay Area Financial Forum to gauge sentiment shifts firsthand.
Future Outlook: From Incremental to Transformative Growth
Hong Hao’s analogy of moving “from 1 to 10” underscores the urgency of awakening animal spirit to achieve exponential progress. With China targeting 5.5% GDP growth in 2025, bull markets could be the linchpin for surpassing technological thresholds. Investors should anticipate regulatory easing from the People’s Bank of China (PBOC) (中国人民银行) to incentivize risk-taking, particularly in yuan-denominated assets.
Synthesizing Insights for Forward-Thinking Action
Hong Hao’s framework reveals that animal spirit is not an abstract concept but a tangible force shaping China’s equity markets. By prioritizing it over short-term profits, stakeholders can contribute to a virtuous cycle of innovation and growth. As global interest in Chinese equities intensifies, we recommend subscribing to updates from the CSRC and engaging with expert analyses to stay ahead of cycles. Embrace the animal spirit—it might just be the key to unlocking the next decade of opportunity.
