China’s MSCI China Index slumped 2.1%, falling below the 20% bear‑market threshold after a sharp pullback in Internet and consumer stocks.

The decline, driven by Alibaba Group and Tencent Holdings, mirrors a broader slide in retail spending that contracted in May for the first time since the pandemic. Investors see a gap between China’s tech‑heavy index and the global AI‑driven rally.

China’s benchmark lacks the hardware giants that have powered gains in Taiwan and South Korea, leaving it exposed to a slowdown in domestic demand. As the index moves into bear territory, managers warn that holding China tech names becomes costly when peers outperform.

The move signals a sharp shift in market sentiment, underscoring structural weaknesses in China’s tech sector amid a global AI boom.