China is mobilising its financial regulators and state-backed investors, including major insurance companies, to help stabilise its domestic stock market amid escalating trade tensions with the United States.
The latest efforts follow comments from US President Donald Trump, who said his administration is considering an additional 50% tariff on Chinese imports.
In response, Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, said it has sufficient liquidity and smooth funding channels to serve as a market stabiliser. The People’s Bank of China followed with an announcement that it would make refinancing tools available to Central Huijin to support its liquidity needs.
Central Huijin is one of several state-affiliated investors known as the “national team,” which typically intervene during periods of heightened market volatility.
On the same day, the National Financial Regulatory Administration said it would raise the proportion of insurance funds allowed to be invested in the stock market.
This regulatory move forms part of a broader initiative to draw institutional capital into equities as China faces external economic pressure. China’s insurance market is the second largest in the world, representing a market share of 10% in 2023.
As of the end of the first quarter of 2024, Chinese insurance companies reported total assets of ¥32.9 trillion (approximately US$4.63 trillion), marking a 4.4% increase from the beginning of the year.
The industry’s average comprehensive solvency ratio stood at 195.6%, while the core solvency ratio reached 130.3%. Property insurers had a comprehensive ratio of 206.3%, life insurers 113.5%, and reinsurers 229.1%.
In early 2025, regulators instructed large state-owned insurers to allocate 30% of their new annual premiums to investments in A-shares, a directive expected to channel hundreds of billions of yuan into the stock market each year. The capital inflow is aimed at reinforcing market liquidity and maintaining investor stability as China responds to US tariff threats.
Some insurance experts have voiced concern over the ongoing trade war, despite investors’ belief of Trump wielding tariffs as a negotiating tool.
Zurich Insurance Group chief market strategist Guy Miller said that tariffs are “fairly brutal and clunky weapons,” and that they will likely backfire on the US.
"It is going to lead to inflation and squeeze real incomes in the US,” Miller said. “So, it creates a vicious circle and a dangerous one."
Despite experts’ misgivings, Trump’s tariffs are indeed bringing some nations to the negotiating table.
After receiving its own set of tariffs – and vowing retaliation – the EU has gone on to propose a "zero-for-zero" tariff agreement aimed at eliminating tariffs on industrial goods, suggesting negotiations while also preparing possible countermeasures.
However, the US responded that the EU must also reduce non-tariff barriers like VAT and strict regulations to move forward with negotiations.
What are your thoughts on this story? Please feel free to share your comments below.
