In the midst of President Trump taking office in the United States, the Beijing authorities announced measures to boost the sluggish stock market by promoting increased investment in the A-share market by major state-owned insurance companies and commercial insurance funds. The announcement stated that 30% of the additional premiums annually would be allocated for A-share investment. However, the market response was tepid. Experts pointed out that funds like social security and pension insurance, which require secure investment, inherently conflict with the high-risk nature of the stock market. Utilizing these funds to decorate the economy is deemed as having a malicious nature.
The State Council Information Office of China held a press conference on the 23rd to introduce the promotion of long-term funds into the market. The Chairman of the China Securities Regulatory Commission, Wu Qing, stated that the actual investment ratio would be increased to enhance the scale and proportion of long-term capital investment in A-shares. Publicly offered funds holding A-share market value were to grow by at least 10% annually over the next 3 years. For commercial insurance funds, efforts were made for major state-owned insurance companies to allocate 30% of the new premiums annually towards A-share investments starting from 2025.
Wu Qing stated, “This means that a minimum of several hundred billion yuan of long-term funds will be added to A-shares each year.”
The China Securities Regulatory Commission had announced on their official website on the 22nd that a joint implementation plan had been issued by the Central Financial Office, China Securities Regulatory Commission, Ministry of Finance, Ministry of Human Resources, Social Security, People’s Bank of China, and the Financial Regulatory Bureau titled “Implementation Plan for Promoting the Entry of Long-Term Funds into the Market.” The main measures include advancing the A-share investment proportion and stability of commercial insurance funds and optimizing the investment management mechanism of the national social security fund and basic pension insurance fund.
Following the official announcement to boost the A-share market, the three major indexes experienced a temporary rise on January 23, only to retract the gains later. More than 2,700 stocks in the overall market displayed a trend of more decline than rise. By the closing day, the Shanghai Composite Index reported a 0.51% increase at 3,230.16 points; while the Shenzhen Component Index and the Growth Enterprise Market Index fell by 0.49% and 0.37% respectively.
Regarding the authorities’ announcement of boosting the stock market by introducing insurance funds, Chinese netizens commented, “Does anyone still believe it now?” “A sieve can’t hold water; short selling strategies are formidable.” “They’re tricking me into buying stocks again, this time I definitely won’t buy in.” “As a long-time stock investor, I’ve seen many such documents, rarely do they actually get implemented.”
Furthermore, some said, “Major shareholders issue low-priced shares and reduce holdings at high prices, without abolishing this policy, no amount of capital can fill the bottomless pit. Each time a new policy is introduced, there’s only a brief uptrend followed by a massive selloff, dragging down many retail investors.”
Reuters reported that with the new prop market plan in Beijing, the Chinese stock market experienced a significant decline at the beginning of 2025 due to fears of Trump imposing high tariffs on Chinese goods, adding further pressure to the already stagnant economy.
In 2024, the Chinese stock market underwent volatile fluctuations, from a low point at the beginning of the year until September 24, when the authorities announced a series of stimulus policies, releasing one trillion yuan of long-term funds into the financial market and reducing the down payment ratio for purchasing a second home from 25% to 15%, causing a surge in the stock market. However, it quickly declined after the holidays, leaving many investors trapped or facing losses.
During the Central Economic Work Conference in Beijing on December 11-12, 2024, the authorities shifted monetary policy from a “stable and flexible” approach of the past 14 years to a “moderately loose” stance, resulting in another brief market rebound. On December 13, the three major A-share indexes closed in the red, with declines exceeding 2%. The Shanghai Composite Index fell below the 3,400-point mark, and the Hang Seng Index dropped by over 400 points, failing to hold above 20,000 points.
Tian Xie, a professor at the Aiken Business School of the University of South Carolina, told the Epoch Times that President Trump would introduce a series of tariff policies in February this year, which would escalate tariffs against China. With the US-China trade war intensifying, the Chinese economy is expected to plunge into a colder winter. The Chinese authorities try to make the stock market look better, creating an illusion of hope in the economy; however, as funds are running out, they resort to utilizing the state-owned insurance and pension trust funds, which is a very malicious act.
“In normal countries, whether it’s the US social security fund or insurance funds, they dare not invest these funds in high-risk areas like the stock market. Generally, they would only invest in safer assets like national bonds or public bonds. However, China’s national bond interest rates are at their lowest in nearly two decades, the returns may not be sufficient to sustain these insurance companies. Therefore, insurance companies are also in a predicament,” he said. “To rescue the stock market, the Chinese Communist Party is investing these funds which should have been placed in the safest places into the high-risk stock market, essentially putting the future retirement savings of the ordinary citizens at risk.”
American economist David Huang told the Epoch Times that the purpose of the Chinese authorities launching this plan is twofold: to stabilize market sentiment, preventing systemic risks, and to support the real economy by guiding long-term funds into the capital market, thereby reducing corporate financing costs. Furthermore, in addition to short-term market support, they aim to demonstrate a layout in the so-called mature capital market, easing the excessive reliance of local finances on real estate, “hoping to ‘shear the leeks’ in the stock market in the future, rather than relying solely on real estate to ‘shear the leeks’.”
However, he emphasized that for funds like social security and pension insurance that require security and stability, their structural nature inherently conflicts with the high-risk stock market.
At the press conference on the 23rd, Xiao Yuanqi, Deputy Director of the China Banking and Insurance Regulatory Commission, mentioned that in October 2023, the CBIRC approved China Life and New China Life to launch pilot programs to raise insurance funds for establishing securities investment funds, with a scale of 50 billion yuan each to invest in the stock market and hold long term. Currently, other insurance companies are applying for reforms of long-term stock investment of insurance funds, with the scale of the second batch of long-term stock investment reform pilot projects being 100 billion yuan, with an initial approval of 50 billion yuan for stock market investment before the Chinese New Year.
Tian Xie said that once this money flows in, the market may see a short-term rebound. But how long can it be sustained? In the previous market rescues, state capital came in and involved ordinary citizens; the rich second generations and red second generations will withdraw completely. This money essentially helps them untangle their positions, but in the process, more ordinary citizens get caught. This time, another batch of ordinary citizens may get caught, and more ‘leeks’ will be sheared.
David Huang also noted that it is uncertain whether there will be several hundred billion yuan entering the market annually in the future because, although pension and insurance funds have a considerable size, the proportion that can be flexibly adjusted for buying high-risk stocks is limited. While regulatory authorities may relax investment ratios, these pension and insurance funds may remain concerned about a stock market crash or being taken advantage of by listed companies. “If pension and social security funds suffer losses, it’s very difficult to recover.”
He stated that the Chinese stock market is essentially a scam for shearing leeks, a mechanism for rent-seeking. Moreover, regarding institutional illegalities, penalties are often imposed, but the funds that are fined are not returned to investors as in mature markets like the US, resulting in a decrease in overall market liquidity.
“This is an ongoing game of shrinking. The real problem lies in the lax market mechanisms and management in the Chinese stock market, non-compliance with laws, failure to protect small and medium investors, treating stockholders and investors as leeks, and human mines. Without a change in the political system, there is no way out,” Huang said.
Tian Xie believed that Chinese netizens should be more aware. “Once the Chinese Communist Party injects money into the market, don’t be greedy, quickly sell off. This may be the last chance to escape.”
Stephen Innes of SPI Asset Management recently stated that the Beijing authorities always try to reverse market sentiment through regulations, but practice has shown that such efforts often fail. “As we have seen in the past, these efforts are like trying to start a fire with wet firewood – often proven to be ineffective and short-lived.”