China Boosts Stock Market with Bold Investment Strategy

The Chinese government is mandating increased investments in domestic stocks by pensions and mutual funds to revitalize the market. The strategy, revealed ahead of the Lunar New Year, aims to boost equity allocation, increase market confidence, and address previous hindrances to investor participation.

In a strategic move, the Chinese government has announced a plan to invigorate domestic stock markets by ordering pensions and mutual funds to increase their investments in onshore stocks. This directive is aimed at propelling the markets from their current stagnation. Officials revealed that mutual funds are expected to boost their holdings of A-shares by at least 10% annually over the next three years, while commercial insurance funds must invest 30% of their yearly new premium revenue into the stock markets.

Wu Qing, chairman of the China Securities Regulatory Commission, emphasized that the implementation of these measures will enhance the equity allocation capacity of medium- to long-term funds, expand investment scale, and improve market conditions. The announcement came just before the Lunar New Year, a period traditionally associated with increased consumer spending.

While China's share markets have substantial size, their growth has been stunted since the Asian financial crisis, partly due to tepid share price increases and declining housing values. The government's strategy aims to counter this by incentivizing shareholder returns and stimulating investor confidence, confronting issues such as high market volatility and shareholder sell-offs.

(With inputs from agencies.)