China is ramping up its efforts to strengthen the equity market amid mounting economic challenges and global uncertainties.
The China Securities Regulatory Commission (CSRC) recently unveiled a series of measures aimed at expanding the role of index investment products in the capital market, signaling a renewed commitment to economic stability and investor confidence.
The CSRC has set an ambitious goal to significantly increase the scale and proportion of index investments in the market over time. A key part of this initiative involves enhancing the asset allocation capabilities of index funds.
The regulator also plans to create more accessible pathways for medium- and long-term funds to participate in the market, thereby encouraging sustained investment activity. To attract foreign investors, the CSRC is promoting yuan-denominated A-share investments through exchange-traded funds (ETFs).
The development of both equity and bond ETFs is also being actively pursued to diversify investment options. On the domestic front, the CSRC aims to reduce operational costs for index funds and waive market-making fees to incentivize broader participation.
In a bid to invigorate the market, CSRC Chairman Wu Qing emphasized the importance of local mutual funds and insurers increasing their equity holdings.
He set a target for mutual funds to raise their onshore equity investments by at least 10% annually over the next three years. Additionally, from 2025, large state-owned insurers are expected to allocate 30% of their new policy premiums to equity investments.
In support of these efforts, China has approved 52 billion yuan (approximately $7.2 billion) for insurers’ long-term equity investments. This funding boost aims to strengthen the financial backbone of the equity market and encourage stable, long-term capital inflows.
China’s stock market has been under pressure in recent months due to concerns about a potential economic slowdown and lingering trade tensions. While Beijing has introduced several stimulus measures, many traders remain skeptical about their effectiveness, citing the piecemeal nature of past efforts.
However, these newly announced measures underscore the government’s determination to revitalize market confidence and attract both domestic and foreign investments.
BLOOMBERG