China Unveils Measures to Bolster Index Investment and Equity Market
To counter external economic headwinds and stimulate its ailing equity market, China has rolled out new measures to promote index investment products.
The China Securities Regulatory Commission (CSRC) aims to significantly increase the scale and proportion of index investments within the capital market. The regulator seeks to enhance the asset allocation function of index funds and facilitate greater participation of medium- to long-term capital.
CSRC will also encourage foreign investment in yuan-denominated A-share markets through exchange-traded funds (ETFs) and foster the development of equity and bond ETFs. Additionally, the watchdog has pledged to reduce index funds' costs and eliminate market-making fees.
Amid concerns over an economic slowdown and potential tariff hikes by the US, Chinese stock prices have been under pressure. Traders have expressed skepticism about the effectiveness of Beijing's piecemeal stimulus efforts.
In a recent move, CSRC Chairman Wu Qing announced that the government is guiding mutual funds and insurers to increase their stock purchases. Mutual funds are expected to increase their onshore equity holdings by at least 10% annually for the next three years, while large state-owned insurers must invest 30% of their new policy premiums from 2025.
Separately, China has allocated 52 billion yuan ($7.2 billion) for insurers' long-term equity investments, highlighting the government's commitment to strengthening the capital market.