China moves to encourage long-term investment

China's financial regulators have pledged to step up efforts to guide large State-owned insurers in increasing both the scale and proportion of their investments in the stock market.

Starting from 2025, 30% of new annual premiums will be allocated to A-share investments, Wu Qing, head of the China Securities Regulatory Commission (CSRC), told a press conference Thursday.

A worker counts Chinese currency RMB at a bank in Linyi, Shandong province. Xinhua

The second round of pilot programs for long-term equity investments by insurance funds, with a scale of no less than 100 billion yuan (US$13.74 billion), will be rolled out without delay, Wu said.

Additionally, the market value of A-shares held by public funds is expected to increase by at least 10% annually over the next three years, Wu noted.

Meanwhile, CSRC pledged to step up efforts to promote cross-border investment and financing, and increase the appeal of the A-shares to international investors. “China’s economic outlook remains optimistic, and the capital market holds great potential. We encourage more overseas investment to come to the A-share market to capitalize on opportunities arising from China’s economic achievements,” Wu said.

Overall, the accessibility and stability of foreign investment in the A-share market has improved, helping foster a largely accommodative ecosystem for overseas investors joining China’s capital market, according to Wu.

As of the end of last year, a total of 866 Qualified Foreign Institutional Investors (QFIIs) had received investment approval, and foreign investors held about 3 trillion yuan (US$412 billion) in A-shares through QFII and the Stock Connect program.

A total of 26 foreign-controlled or foreign-invested securities companies, fund companies, and futures companies, have been approved to operate in the country.

“Foreign capital plays a pivotal role in investing in the A-share market and contributes to the stable development of the market,” Wu added, emphasizing that China’s capital market will remain open to foreign investors.

The CSRC issued a notice Wednesday to encourage long-term investment in China’s stock market.

The performance of State-owned insurance companies will be assessed over a cycle of more than three years. For the national social security and basic pension funds, the evaluation periods will be over five years and over three years, respectively.

The authorities said they will encourage listed companies to increase stock buybacks and distribute dividends several times per year.

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, and the scale of the Securities, Funds and Insurance companies Swap Facility operation will be expanded, the CSRC said.