Chinese regulators have unveiled an action plan to direct investment funds to stabilise the nation’s stock markets, amid rising tensions with the US following President Donald Trump’s threat to impose tariffs.
China will direct medium- and long-term funds, including commercial insurance funds, the National Social Security Fund and mutual funds, to increase their participation in the stock market, according to a joint statement on Wednesday from multiple government agencies, including the China Securities Regulatory Commission (CSRC), the Ministry of Finance, the People’s Bank of China (PBOC) and the National Financial Regulatory Administration.
The proportion of the funds’ investments in the stock market would be gradually increased and a long-term system will be set up to track these investments, the statement added.
The action plan to “stabilise the stock market, removing barriers for medium- and long-term funds to enter the market” was a follow-up to a series of policies introduced last year to boost the Chinese economy and sluggish stock market, the statement said.
The plan comes as China tries to navigate uncertainties in Trump’s second term. On Tuesday, Trump said he was considering a 10 per cent tariff on Chinese exports from February 1, as a penalty for the flow of fentanyl, which is responsible for thousands of deaths in the US annually.
Chinese stocks slipped in the first week of 2025 for their worst start to a year since 2016. On Wednesday, benchmarks in Shanghai and Hong Kong tumbled on the tariff proposal and an investment plan to “beat China” in artificial intelligence.
“The authorities have prepared plans,” said Xing Zhaopeng, senior China strategist at ANZ. “Since Trump announced the tariff, China has responded by releasing this plan.”
Chinese regulators will hold a briefing on Thursday, which will be attended by top officials, such as CSRC chairman Wu Qing, Deputy Finance Minister Liao Min and PBOC official Zou Lan.
“It is necessary to act in advance to offset the potential impact of tariff threats on the stock market,” said Shen Meng, director at Beijing-based investment firm Chanson & Co.
“Trump’s tariff threats continue to weigh on sentiment, while domestic structural economic reforms remain a significant challenge,” Shen said. “Long-term capital is vital for stabilising the [Chinese] capital market and strengthening investor confidence in its future growth prospects.”
He said that the flow of capital would depend on realistic expectations of returns and relying solely on policy driven initiatives to direct capital into the market may dampen enthusiasm.
While the initiative could generate short-term excitement in the market, revitalising China’s depressed stock market would take more time, he added.
“Fresh money inflow is always supportive at the moment of purchase, but whether it can be long-lasting is another question,” said Gary Ng, a senior economist at French investment bank Natixis.
“The structural obstacle is the much lower corporate profit growth and return on capital for investors compared to the past,” he added. “Unless firms make more money and show better prospects, attracting long-term capital into the equity market seems hard.”
Chinese stocks enjoyed a short-lived bull run last quarter after Beijing introduced a slew of measures to boost the economy and stock markets in late September, including policies to support the property sector, mitigate local government debt risks and subsidise consumption.
However, the market gave back much of the gains in October and November, as these measures failed to impress investors.
