China has rolled out a series of measures to stabilize its stock markets, including plans to increase the amount pension funds can invest in the nation’s listed companies. This move comes as the country seeks to boost market confidence and ensure a steady flow of investments amid global economic uncertainties, particularly in light of a second Donald Trump presidency. The central government issued a directive to “steady the stock market, and clear bottlenecks for the introduction of mid-long term capital,” according to a notice posted by the China Securities Regulatory Commission (CSRC) on Wednesday.
CSRC Chairman Wu Qing, Deputy Finance Minister Liao Min, and central bank official Zou Lan are set to hold a briefing on Thursday to discuss the new measures in detail. Among the initiatives, China encourages listed firms to increase share repurchases to further support the market. The securities watchdog also stated that the country will guide large state-owned insurers to raise their investments in A-shares and prompt listed companies to increase their share buybacks.
Kevin Net, head of Asian equities at La Financière de l’Echiquier, views this as a long-term positive, similar to Japan’s actions with the Government Pension Investment Fund during Abenomics, which involved a shift towards a higher domestic equities allocation. However, he is unsure if this will have a significant impact in the short term.
China boosts market with new measures
Chinese stocks have had a challenging start to 2025, following a difficult year impacted by a meltdown in the property market and weak consumer sentiment. Analysts have anticipated that the Chinese government will deploy more tools to combat the turmoil brought on by Trump’s second term as US President, who has widened his tariff threats to include China. Additional policies announced on Wednesday include encouraging mutual fund houses to issue more equity-focused fund products, allowing institutions such as mutual funds, insurers, pensions, and wealth management units at banks to participate in listed firms’ share placements as strategic investors, and guiding listed firms to utilize the central bank’s relending tool to boost share repurchases and stake increases.
The People’s Bank of China (PBOC) has also emphasized the effective use of a lending facility introduced three months ago to stabilize the capital market. The facility provided a total of 300 billion yuan ($41 billion) in loans to 21 commercial banks for one year at an interest rate of 1.75 percent, intended to fund share buybacks by listed companies or major shareholders. Significant adjustments have been made to the lending tool, including lowering the self-funding ratio for companies’ share buybacks to 10 percent and extending the maximum loan term to three years.
The PBOC stated that the lending tool has contributed to market stability and boosted investor confidence. Experts highlight that the lending facility has played a crucial role in stimulating market vitality, improving companies’ competitiveness, and accelerating industry advancement. China’s top regulators have been advancing reforms in these areas, putting more emphasis on companies’ market value management and overall quality improvement.
