China Unveils Plan to Revitalize Lagging Stock Market
Boosting Investor Confidence
In a bid to revitalize its struggling stock market, China has announced a comprehensive plan to guide big state insurers and commercial insurance funds to increase their investments in the A-share market. This move is aimed at shoring up investor confidence and stabilizing the market, which has been reeling from deep losses in recent weeks.
State-Owned Insurers to Take the Lead
Under the plan, jointly released by six financial regulators, including the securities regulator, big state-owned insurance companies will be directed to increase both the size and proportion of their investments in Chinese stocks listed on the mainland and equity funds. This move is expected to have a significant impact on the market, given the substantial assets held by these insurers.
Long-Term Performance Evaluation
To ensure that state-owned insurance companies are committed to this strategy, the regulators will implement a long-term performance evaluation system. This system will assess their annual return on equity, with a weightage of no more than 30% for the evaluation. A longer three-to-five-year cycle will carry a weightage of at least 60%. This approach will encourage insurers to adopt a more sustainable investment strategy.
Addressing Market Concerns
The plan comes at a critical juncture, as Chinese stocks have kicked off 2025 with significant losses. Market sentiment has been dampened by concerns that U.S. President Donald Trump will impose hefty tariffs on Chinese goods, further exacerbating the already sluggish economy. By increasing investments in the stock market, China aims to mitigate these concerns and restore investor confidence.
Broader Impact
The plan will also have a broader impact on the market, as China’s National Social Security Fund and pension funds will increase their investments in the stock market. Additionally, mutual fund managers will be guided to steadily increase both the size and proportion of equity funds under their management. This will lead to a more robust and diversified investment landscape.
Comprehensive Support
This plan is part of a broader effort by Chinese authorities to support capital markets. In recent months, authorities have rolled out swap and relending schemes totaling 800 billion yuan for stock purchases. These measures demonstrate China’s commitment to reviving its stock market and restoring investor confidence.
Leave a Reply