China is taking significant steps to stabilize its financial markets by encouraging state-owned insurers to invest billions of yuan in stocks. The Chinese government has directed insurers to allocate at least 30% of their new policy premiums to local shares, while mutual funds have been instructed to increase their shareholdings by 10% annually over the next three years. This move could result in up to 500 billion yuan ($68 billion) flowing into the market from China’s three largest state-owned insurers alone.
Currently, insurers hold shares valued at 4.4 trillion yuan. The policy shift is part of a broader effort by Chinese authorities to bolster the stock market and restore confidence in the world’s second-largest economy. The mainland’s CSI 300 index rose by as much as 1.8% on Thursday, nearly offsetting losses from the previous day after the new US administration threatened tariffs on Chinese exports.
Analysts at Bank of America estimate that the additional inflows into the equity market could range from 470 to 530 billion yuan in 2025. Winnie Wu, chief China equity strategist at Bank of America, said, “Clearly, regulators care about the stock market.
Boosting insurer investments in stocks
They want to adopt a supportive stance and keep injecting confidence into the market right before the Lunar New Year.” However, Wu noted that the impact of such measures appears to be diminishing compared to similar efforts in September 2024. Chi Lo, senior Asia-Pacific market strategist at BNP Paribas, described the government’s announcement as a stabilizing move due to the lack of confidence in the private sector and weak demand for stocks. The CSI 300 index had declined by 15% from a peak in early October despite previous government support measures, including funding for stock buybacks and mortgage cuts.
Chinese insurance companies listed in Hong Kong, such as China Life Insurance and Ping An Insurance, saw their shares rise by 2.3% and 1.9%, respectively, following the announcement. The latest measures also included fee cuts for some mutual fund products and a crackdown on speculative trading of Chinese shares. Investors are closely watching for further signs of stimulus from Beijing this year, particularly measures to support domestic consumption.
This month, authorities expanded a scheme that allows consumers to trade in old household appliances for new ones. Lo said, “The government has to do something to turn around confidence, and nobody knows exactly what this something is. Beijing is trying various strategies, such as asking state-owned companies to buy stocks and property, in the hope that some of these measures will help to restore confidence.”
The mainland’s CSI 300 index closed up 1% on Thursday, while Hong Kong’s Hang Seng benchmark was down 0.4%.
