At the beginning of the new year, it is reported that the Chinese Communist Party’s major stock exchanges have requested some large mutual funds to limit the selling of stocks. According to three sources familiar with the matter who spoke to Reuters, this is one of the measures taken by the authorities to stabilize the market.
At least four large mutual funds reportedly received phone calls from the Shanghai and Shenzhen stock exchanges on December 31 last year, as well as on January 2 and 3 this year, instructing them to buy more stocks daily than they sell.
This move comes as the Chinese stock market has seen a significant decline at the start of 2025. Investors are concerned that the incoming U.S. President Donald Trump may impose high tariffs on Chinese goods, further intensifying the pressure on China’s already weakened economy.
One source revealed that based on the exchanges’ guidance, these funds are still allowed to sell stocks, but if the amount sold on a given day exceeds the amount bought, they will need to increase their positions in the short term to offset the difference. He added that “such guidance could become a regular occurrence,” noting that a similar request was made early last year.
The Shanghai and Shenzhen stock exchanges have not responded to Reuters’ request for comments.
On the first trading day of 2025, the China blue-chip stock index CSI 300 plunged by 2.9%, marking the worst New Year start since 2016. The index has dropped by over 5% in the past week.
There are two weeks left until Trump’s second term as U.S. President. He has previously vowed to impose high tariffs on Chinese goods, accusing the CCP of unfair trade practices. As a result, the fluctuation of the Renminbi exchange rate has intensified, and mainland bond yields and stock prices have fallen simultaneously.
The exchange’s restriction on fund managers selling stocks is one of several measures taken by the authorities to stabilize market sentiment. Over the past few months, the authorities have introduced an 800 billion RMB stock market boosting plan, which includes supporting asset management companies, insurance companies, and securities firms in purchasing stocks, as well as listed companies repurchasing their own shares.
It is worth noting that when the Chinese stock market fell to a five-year low last year, the exchanges also issued similar appeals to funds to stabilize the market.