In response to a sharp drop in domestic stock prices, China’s sovereign wealth fund intervened on Monday, increasing its equity holdings to support the market.
Central Huijin Investment, a unit of China Investment Corp owned by the State Council of China, announced it had purchased China-listed shares through exchange-traded funds (ETFs) and would continue to do so to maintain market stability.
The intervention follows a 7% plunge in the Shanghai Composite Index, its steepest decline in five years, after the U.S. imposed additional tariffs on Chinese imports. In retaliation, China levied its own tariffs, escalating tensions and sparking fears of a prolonged trade war and global economic slowdown.
However, Huijin’s statement helped stabilize the market, which recovered from earlier losses of up to 9%. Despite the recent volatility, Chinese stocks have lost 7.6% since U.S. President Donald Trump’s tariff announcement, a less severe decline compared to the 13% drop in Japan’s Nikkei Index.
Huijin expressed confidence in China’s capital market, stating it is “firmly optimistic about the development prospects of China’s capital market and fully recognizes the current investment value of A-shares.”
Stock trader Wen Hao, an executive at Yingzhiliang Hangzhou Technology, suggested that the market has limited downside due to the support from state-backed funds and potential government measures such as monetary easing and consumer stimulus. However, William Xin, chairman of Spring Mountain Pu Jiang Investment Management, warned that these efforts may not be enough to counter the broader economic impact of the trade war. He advised caution, saying that “hunting for bargains now is like catching a falling knife.”
Central Huijin is part of China’s “National Team” of state-backed investors, including China Securities Finance Corp, tasked with stabilizing the market during periods of uncertainty. In the past, Huijin has stepped in to buy stocks through ETFs during market crashes, and its ETF holdings were valued at 1 trillion yuan ($137 billion) at the end of 2024, according to Guosen Securities.
On Monday, trading volumes for Huijin-favored ETFs, such as the Harvest CSI 300 ETF and the ChinaAMC CSI 300 ETF, spiked to their highest levels in a year.
