China is taking big steps to boost its capital market by encouraging long-term investments. At a recent press conference in Beijing, Wu Qing, the Chairman of the China Securities Regulatory Commission (CSRC), highlighted plans that could inject hundreds of billions of yuan into the market each year.
The new plan aims to remove hurdles and promote high-quality development in the capital market. It focuses on key investors like commercial insurance companies, public funds, national social security, and basic pension funds, introducing specific measures to help them participate more effectively.
In the short term, the plan requires an increase in the size and proportion of investments in A-shares—stocks of companies based in the Chinese mainland. Over the longer term, it sets up frameworks to encourage stable, value-based investing. This includes better evaluation systems, customized investment policies, and an improved market environment.
Wu announced that public funds are expected to grow their A-share holdings by at least 10% annually over the next three years. Major state-owned insurance companies are also set to direct 30% of their annual new premiums into A-share investments starting this year. These initiatives are expected to bring massive capital into the market, strengthening its foundation.
The second phase of a pilot program for insurance funds is scheduled for early 2025, which is projected to add another 100 billion yuan (about $13.7 billion) in long-term stock investments.
To support these moves, the plan extends the evaluation periods for long-term funds. This means that public funds, state-owned insurance companies, pension funds, and annuity funds will now use evaluation periods of at least three years. The national social security and basic pension funds will have assessment cycles of over five years. According to Wu, these longer cycles are crucial for protecting investments from short-term market ups and downs and promoting stability.
The national social security and basic pension funds have been spotlighted as models for long-term investing, achieving an impressive average annual return of 11.6% on A-share investments over the past 20 years. Wu credits this success to their focus on value-driven, long-term strategies.
Wrapping up, Wu stated that these new measures are designed to enhance returns on long-term investments, creating a win-win situation for all players in the market.
Reference(s):
China sets targets for long-term investment in capital market
cgtn.com
