Chinese shares rebounded this month after a horrible couple of years. The MSCI China surged 21% in November, as Beijing fine-tuned its strict pandemic curbs and stepped up support for the struggling property sector. Even after the rally, the index has still lost more than half of its value since early 2021, basically wiping out all the gains in the past decade.

A quick turnaround in China’s Covid-19 policy or property market is unlikely. The recent surge in Covid-19 cases and the resulting lockdowns across the country are a strong reality check for the wide-eyed optimism that was evident in some press and brokerage reports earlier this month. But sentiment that the worst is over will nonetheless likely continue to drive the market in the coming months—especially given how battered Chinese stocks really are. The Hang Seng China Enterprises Index trades at nine times forward earnings according to FactSet, hovering just above its lowest levels in decades.

Trading multiples for Chinese stocks have dropped, but that doesn’t answer the question of how much investors should pay. Earnings per share for stocks in the MSCI China Index have fallen 31% from their peak last October according to Citi, with real estate, technology and consumer stocks leading the decline. An eventual reopening of the economy will help boost earnings, but that will likely still be months away.

More important, long-term earnings growth in China has long lagged behind other countries—and there are now new reasons to expect this trend to continue. Earnings per share for the MSCI China have been flat since 2010 despite strong economic growth, notes Citi. Over the same period, earnings per share for the MSCI USA Index has grown 9% per annum.

Partly that is because while earnings growth at old-style China market favorites such as state-owned energy and telecom companies has slowed, they still make up a big part of the Chinese stock index. But the earnings-growth engine that was expected to replace those stolid stocks—China’s previously dynamic internet sector—now faces structural headwinds following regulators’ concerted assault of the past two years.

Moreover, it is unclear what could rise up to take their place. China faces an uphill battle in the extraordinarily capital-intensive chip sector. And while it has strong contenders in the electric-vehicle and battery space, those industries are still in their infancy and could face further technological disruption from abroad.

In other words, even if China’s economy bounces back substantially as Covid-19 and property-sector controls loosen, it is far from clear that will translate into robust earnings growth for investors over the medium term. A China focused on massive—and possibly wasteful—capital expenditures to chase self-reliance in key industries might not be a China that delivers outsize rewards for public-stock investors.

Write to Jacky Wong at jacky.wong@wsj.com