China's Finance Watchdog Says the AI Money Rush Is Crowding Out Everyone Else

Xiao Yuanqi, vice head of China's National Financial Regulatory Administration, stood up in Hong Kong on Tuesday and said what a lot of people in the room were thinking: the world's money is piling into artificial intelligence way too fast, and it's starting to break things on the way in. He delivered the warning at the Hong Kong Monetary Authority's Global Financial Leaders' Summit.

The mechanics, per Xiao: cash flooding into the biggest AI names has supercharged their expansion. Everyone else pays for it. Traditional industries are getting squeezed out as borrowing costs climb, which dents their ability to reinvest and grow, and pushes credit risk higher. His fix? Purpose-built frameworks for macroeconomic management and risk prevention.

Markets are already voting. Asia's AI-heavy corners are sliding, and the numbers are ugly. China's tech-focused STAR 50 dropped nearly 4% on Tuesday, touching its lowest level since April 2025 and giving back the prior session's gains. The CSI 300 ended the day down 0.2%.

It's not just China feeling the chill. South Korea, Japan and Taiwan have all posted significant declines recently, and the pain is concentrated in AI-tilted names — a fresh round of questions about whether those valuations ever made sense.

Beijing isn't standing still. State-linked 'national team' buying pushed ETF trading volumes to roughly 120 billion yuan, about $18 billion, the highest since late January. Officials also revived stock-buying facilities and cheaper funding for share buybacks. Confidence, though, is still wobbly after the CSI 300's sharp October drop, with growth and AI earnings worries doing the heavy lifting.

The same summit carried a second, softer message. Vice Premier He Lifeng reaffirmed Beijing's backing for Hong Kong as a key financial hub and offshore yuan center, pledging to keep the external yuan circuit open and boost its liquidity, plus expand sovereign and corporate bond issuance in the currency. Chief Executive John Lee pointed to the city's stability, named commodities trading, digital assets and green bonds as strengths, and officials flagged progress on a gold trading link with Shanghai. Two messages, one balancing act: chase the AI boom, but don't let it take the whole neighborhood down with it.