China Announces Stock Market Stimulus Measures... "State-Owned Insurance Companies Should Lead Investment Expansion"

30% of New Insurance Premiums to Be Invested in A-Shares
About 10 Trillion Won to Be Approved Before the Spring Festival

The Chinese government has unveiled a stock market revitalization plan aimed at boosting the sluggish economy by expanding stock market investments by large state-owned insurance companies and institutional investors such as public funds.

On the 23rd, according to Chinese economic media Caixin and Bloomberg News, the China Securities Regulatory Commission, Ministry of Finance, and the China Banking and Insurance Regulatory Commission held a press conference at the State Council to announce the "Implementation Plan to Promote Medium- and Long-term Capital Market Inflows," which includes these measures.

According to the plan, large state-owned insurance companies must invest 30% of new premium income into A-shares (domestic mainland stocks listed on the Shanghai and Shenzhen stock exchanges) starting this year. Wu Qing, Chairman of the China Securities Regulatory Commission, emphasized, "We will continuously encourage increasing the proportion of insurance funds invested in the stock market," adding, "Large state-owned insurance companies should play a leading role." Wu stated that a related pilot project will be swiftly implemented in the first half of this year to encourage insurance funds of over 100 billion yuan (approximately 19.7 trillion KRW) to be invested in the stock market, with plans to gradually expand the scale. Of this, 50 billion yuan (approximately 9.9 trillion KRW) is expected to receive investment approval before the Spring Festival. Wu added that this measure will bring in at least several hundred billion yuan of long-term capital into A-shares annually.

Caixin reported that the existing premium income of the five major listed insurance companies increased by 110 billion yuan compared to the previous year, and the industry estimates that if the proportion of insurance funds invested in stocks and equity funds rises from the current 12% to 14%, approximately 700 billion yuan (138.2 trillion KRW) will flow additionally into the stock market.

Furthermore, the authorities have decided to increase the holdings of A-shares by public funds (based on free float market capitalization) by at least 10% annually over the next three years. Fund sales fees will also be further reduced to enable investors to save about 45 billion yuan (8.9 trillion KRW) annually. Fund companies will be encouraged to purchase their own equity funds with a certain percentage of their annual profits, and the development of exchange-traded fund (ETF) products will be promoted.

Wu Qing explained, "Public funds have become an important capability of institutional investors in the capital market," noting that the scale of public funds increased from 13 trillion yuan (approximately 2566.6 trillion KRW) in 2019 to 33 trillion yuan (approximately 6515.2 trillion KRW) by the end of last year. He emphasized strengthening the Party's guidance and long-term performance evaluation of the fund industry to prevent large funds from generating minimal returns.

Additionally, the plan includes improving the performance evaluation methods of pension funds and encouraging companies to increase share buybacks and dividend payments. Wu stated that listed companies will be guided to pay dividends before the Spring Festival.

Investors generally responded positively to the announcement. The CSI300 index, composed of the top 300 stocks by market capitalization on the Shanghai and Shenzhen stock exchanges, rose as much as 1.8% in early trading and closed the morning session up 0.6%. The Shanghai Composite Index rose 1%. China Life Insurance's stock price increased by 4.3%, and the insurance sector index also rose 2.6%.