In response to the recent impact of Donald Trump’s tariffs, which have put significant pressure on the Chinese stock market, Beijing initiated a coordinated governmental effort to bolster share prices. Central Huijin, a sovereign wealth fund, issued an unusual statement identifying itself as part of the “national team,” which refers to Chinese institutions that collaborate to support the market.
Central Huijin committed to increasing its shareholdings, and shortly thereafter, China Chengtong Holdings, a state asset management firm, announced it would invest Rmb100bn ($13.6bn) in the stock markets. China Reform Holdings also pledged Rmb80bn, while the National Council for the Social Security Fund, under the Ministry of Finance, indicated plans to increase its holdings as well. Additionally, the National Financial Regulatory Administration relaxed regulations on stock purchases by insurers, many of which are state-owned.
By Tuesday’s close, more than 100 of China’s leading listed companies, including state-owned enterprises like Sinopec, China Mobile, and the baijiu brand Moutai, announced share buyback plans. This wave of announcements and commitments, coupled with market orders, helped the CSI 300 index recover some ground after Monday’s dramatic 7 percent decline.
Ting Lu, chief China economist at Nomura, commented that the financial markets, particularly the stock markets, represent the first battleground of the tariff war. He anticipated significant intervention in the stock markets from China’s “stabilisation funds” or “national teams,” reinforced by the People’s Bank of China (PBoC) in the coming weeks.
Amidst a slowdown in the property market, which has seen declining new home prices for nearly two years, the stock market has become an increasingly vital confidence gauge. The government’s efforts to stimulate the economy, hindered by weak consumer confidence, have focused on revitalizing the stock market.
In September, the central bank unveiled several initiatives, including two PBoC programmes amounting to at least Rmb300bn for financing share buybacks and purchases, and a Rmb500bn swap facility to assist financial institutions with share purchases. The resulting market rally was, however, dampened by new tariffs imposed by Trump.
The concept of a national team composed of robust institutions gained prominence following China’s stock market crash in 2015-16. This strategy has since evolved to encompass broader indices, particularly through the use of exchange traded funds (ETFs).
Goldman Sachs reported substantial inflows into ETFs for A-shares—stocks of mainland Chinese companies trading in Shanghai and Shenzhen—totaling Rmb170bn on Monday and Tuesday. Goldman estimated, based on Wind data, that the national team purchased Rmb740bn of A-share equities in 2024.
Kinger Lau, chief China equity strategist at Goldman, noted the significant ETF activity, indicating substantial involvement from the national team. Central Huijin’s use of the Chinese term “guojia dui” was seen as a particularly direct acknowledgment of its role in this context, and it expressed optimism about China’s economic future and capital markets development.
In an effort involving multiple regulators, state-owned enterprises from Zhejiang province participated in discussions on repurchases, with remarks emphasizing the role of such actions in stabilizing the capital market and enhancing market confidence.
Central Huijin’s increase in ETF holdings, alongside regulatory encouragement for buybacks by both state-owned and private enterprises, was highlighted by Meng Lei, China equity strategist at UBS Securities. The immediate market responses following the tariff shock set expectations for market support.
With the escalating trade war applying pressure on GDP targets, analysts are forecasting the possibility of increased domestic stimulus in the upcoming weeks and months, with potential policy rate cuts occurring earlier than anticipated. The stock market has become a critical component of the broader stimulus measures, underscored by the attention it received during the Two Sessions meeting of top officials in March.
By Wednesday, the Chinese stock market stabilized, with the CSI 300 index rising by 1 percent. Despite potential concerns about intervention, Goldman’s Lau pointed out that this type of market involvement has historical precedents in various markets.
