China Plans to Invest in Stock Market

SHANGHAI/HONG KONG (Reuters) – China announced plans on Thursday to channel hundreds of billions of yuan from state-owned insurers into shares, aiming to support the struggling stock market.

The initiative, revealed by six financial regulators including the securities regulator, was first aired on Wednesday, coinciding with Donald Trump beginning his second term as U.S. President.

Following Trump’s threat of a 10% punitive duty on Chinese imports, these coordinated measures reflect Beijing’s efforts to bolster markets amid potential geopolitical challenges.

The new measures include higher investments from insurers and mutual funds, reduced fees, and other corporate reforms. They are part of an ongoing series of actions authorities have taken since last September to revitalize the stock market, though with limited success.

Following a press conference by Wu Qing, head of the China Securities Regulatory Commission (CSRC), stocks showed some upward movement, with the CSI300 blue-chip index up 0.2% and the Shanghai Composite Index rising 0.6%. However, the Hong Kong Hang Seng Index fell 0.6%.

A gauge tracking insurers increased by 3.3%, with China Life Insurance rallying by 4.8%.

Ben Bennett, an Asia-Pacific investment strategist at Legal And General Investment Management, noted that while the plan is not surprising, it is encouraging to see concrete policies. He emphasized that these measures should accompany stronger growth and earnings for maximum effectiveness.

CSRC chief Wu announced that insurers will be urged to invest at least 100 billion yuan ($13.75 billion) of long-term funds into stocks in the first half of the year. Regulators will also encourage major state insurers to allocate 30% of new annual premiums into A-shares, and mutual funds should raise their tradable market value in A-shares by 10% annually over the next three years.

Wu highlighted the essential role of medium- and long-term funds as stabilizers for the capital market, asserting that such measures will channel “several hundred billion” into onshore stocks each year, thereby solidifying the market’s positive trajectory.

The plan also encourages mutual fund managers to increase their own equity investments, lower fund sales fees, and promote the development of exchange-traded funds (ETFs).

Beijing has been ramping up policy support to uplift the stock market, which faces challenges from a prolonged property crisis, deflation, and geopolitical tensions. In September, authorities had introduced swap and re-lending schemes worth 800 billion yuan to facilitate stock purchases, alongside guidelines to encourage companies to improve shareholder returns.

Stock prices have experienced high volatility since September’s support announcement, with the CSI 300 index initially surging 40% in the following two weeks. However, discontent regarding the execution pace has since halved that gain.

($1 = 7.2728 Chinese yuan)