In its latest effort to bolster its struggling equity market amid tariff threats from the US, China is directing mutual funds and insurers to significantly increase their stock investments.
The China Securities Regulatory Commission chairman, Wu Qing, announced on Thursday that mutual funds should boost their onshore equity holdings by at least 10% annually over the next three years. Additionally, large state-owned insurers must allocate 30% of their new policy premiums to stock investments starting in 2025.
Following the announcement, the CSI 300 Index initially rose by 1.8% but settled to close the morning session up 0.6%. Meanwhile, the Hang Seng China Enterprises Index increased by 0.5%.
Jason Chan, a senior investment strategist at Bank of East Asia in Hong Kong, remarked that this policy benefits Chinese equities, particularly state-owned enterprises with high dividend yields, but only to the extent for market stabilization. Additional fiscal stimuli would be needed for a more significant market boost.
China is set to launch the second phase of a trial program for insurers’ long-term equity investments in the first half of this year, involving at least 100 billion yuan ($13.7 billion), with Vice Finance Minister Liao Min mentioning plans to provide state-controlled insurers with greater flexibility in managing long-term investments.
This development sparked a surge in insurance stocks, with a Bloomberg index of Chinese insurers listed in Hong Kong climbing as much as 4.5%.
Chinese stocks have recently faced downward pressure due to concerns over an ongoing economic slowdown and the potential imposition of higher tariffs by new US President Donald Trump. Traders have expressed growing disappointment with Beijing’s gradual stimulus measures, questioning their effectiveness.
The authorities on Wednesday unveiled a series of strategies aimed at stabilizing its stock markets, including plans to increase the proportion of pensions that can be invested in domestic listed companies.
Additionally, in September, the People’s Bank of China (PBOC) announced the establishment of a swap facility to provide liquidity to securities firms, funds, and insurance companies for equity purchases.
