China's New Push: Boosting Markets with Medium- and Long-Term Funds

In a strategic move to revitalize its languishing markets, China has ordered medium- and long-term funds to invest more in shares, aiming to stabilize and enhance the performance of its stock market. This initiative, unveiled by Chinese financial authorities, is expected to have a significant impact on the market's stability and growth in both the short and long term.

The plan, jointly released by the office of the Central Financial Work Commission and five government departments, emphasizes the importance of attracting funds from commercial insurance, national social security, and basic pension funds to boost their presence in the stock market. Annuity funds, public funds, and other medium- to long-term capital funds are also expected to increase their stock market investments.

To achieve this, the plan aims to increase the proportion and stability of A-share investment in the portfolios of commercial insurance companies. The investment management mechanisms of the national social security fund and the basic pension insurance fund will also be optimized to improve their investment strategies.

The performance of state-owned insurance companies will be assessed over a cycle of more than three years, with an emphasis on long-term performance rather than short-term gains. For the national social security and basic pension funds, the evaluation periods will be over five years and over three years, respectively. The investment of annuity funds should be more market-oriented, with both the scale and the proportion of equity funds expanded in public offering funds.

In addition to these measures, the plan also underscores efforts to optimize the capital market's investment ecosystem. Listed companies will be encouraged to increase stock buybacks and implement policies for multiple dividend distributions annually. Public funds, commercial insurance, basic pension, annuity funds, and wealth management funds will be able to participate in listed companies' private placements as strategic investors. The scale of the Securities, Funds and Insurance companies Swap Facility operation will also be expanded.



The increased investment from medium- and long-term funds is expected to have a positive impact on the stability and performance of the Chinese stock market in the short and long term. In the short term, the plan aims to reduce market volatility and speculative trading by encouraging more stable and long-term oriented investment. In the long term, the increased investment from these funds will provide a more stable and predictable source of capital for listed companies, enabling them to make long-term strategic decisions and invest in growth opportunities.

The optimization of the capital market's investment ecosystem, including encouraging listed companies to increase stock buybacks and distribute dividends, is also expected to influence investor confidence and market growth. By providing investors with clear cash flows and increasing shareholder value, these measures can boost investor confidence and attract more investment into the stock market.

In conclusion, China's new push to boost its languishing markets by ordering medium- and long-term funds to invest more in shares is a strategic move that is expected to have a significant impact on the market's stability and growth. By increasing the investment of these entities in the stock market, the plan aims to boost liquidity, stability, and confidence, thereby attracting more investment and driving market growth.