[Edaily Marketin Reporter Won Jae-yeon ] As concerns over overheated AI investments spread across global markets, China is also experiencing a sharp sell-off, particularly in tech stocks. From mid-month, approximately 10 trillion yuan (about 2,160 trillion won) in market capitalization evaporated from the Shanghai and Shenzhen stock markets over a two-week period.

In response, Chinese state-owned asset management companies have publicly announced large-scale stock purchases and signaled further investments. China’s so-called “national team”—which typically steps in whenever the stock market plummets—has once again taken center stage.

Whereas in the past the “National Team” would buy exchange-traded funds (ETFs) focused on large-cap stocks to prevent a broad market crash, it is now explicitly targeting central state-owned enterprises and high-tech companies in sectors such as semiconductors and AI. This move goes beyond simply propping up stock indices; it represents an effort to use state capital to defend the corporate value of strategic industries being fostered by the Chinese government.

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China Guoxin announced in mid-month that entities affiliated with its subsidiary, Guoxin Investment, had utilized more than 50 billion yuan (approximately 10.6 trillion won) in special re-loans for stock buybacks and equity expansion, along with linked funds, to stabilize the market. It also stated that it would continue to purchase additional shares of central state-owned enterprises using special re-loans and its own funds.

China Chengtong, along with its subsidiaries Chengtong Capital and Chengyang Investment, also recently purchased nearly 10 billion yuan (approximately 2.1 trillion won) worth of shares in state-owned enterprises. They plan to mobilize their own funds and special re-loans to make large-scale additional purchases not only of shares in central state-owned enterprises but also of technology company stocks and related ETFs.

Both China National Investment and China Chengtong are Chinese state-owned enterprises managed by the State-owned Assets Supervision and Administration Commission of the State Council. Unlike typical state-owned enterprises that operate businesses in specific industries, these entities are tasked with reallocating state-owned capital by managing state-held stakes, funds, and stocks.

The so-called “national team” is a collective term for state-owned capital management companies such as China National Asset Management Corporation and China Qing Tong, as well as pension funds and state-owned securities firms. When the stock market plunges, they buy stocks in accordance with government directives or policy objectives, playing a role in simultaneously stabilizing the market and implementing national industrial policies.

The “national team” first came to the forefront during the 2015 crash of the Chinese stock market. At that time, the Shanghai Composite Index plummeted by more than 30% over the course of about a month, prompting the government to prop up the market by purchasing stocks, suspending initial public offerings (IPOs), and restricting the sale of shares by major shareholders.

It is estimated that the shares purchased by government-affiliated institutions at that time accounted for 4.3% of the total market capitalization of all Chinese listed companies. Depending on the study, the amount of funds injected reached up to 1.7 trillion yuan (approximately 360 trillion won), and the targets of the purchases spanned the entire market, ranging from large state-owned enterprises to small and mid-cap stocks.

Their active role continued thereafter. While the goal of the “national team” in 2015 was to rescue the entire market as it was collapsing, by 2024, the primary strategy shifted to directly propping up the index. At that time, the Central Bank purchased at least 300 billion yuan (approximately 63.6 trillion won) worth of large-cap ETFs in the first quarter of 2024 alone.

From Index Defense to Strategic Enterprise Value Defense

Meanwhile, this intervention differs significantly from past efforts. The purpose and targets of the purchases are more specifically aligned with industrial policy. Last April, China National Investment Corporation (CNIC) announced that it would allocate an initial 80 billion yuan (approximately 17 trillion won) to purchase shares of central state-owned enterprises and technology innovation companies, as well as related ETFs. While it previously bought stocks with large index weightings when the market fell, this time the government selectively supported industries and companies it aims to foster.

This shift is evident in the actual holdings of state-owned capital. As of the end of the first quarter of this year, China National Investment appeared on the list of the top 10 circulating shareholders of 22 listed companies, with the valuation of its holdings reaching 56.022 billion yuan (approximately 11.9 trillion won). Major investment targets include strategic industries such as semiconductor equipment companies, quantum communication firms, and the aerospace sector, including SMIC, China’s largest foundry company.

The method of raising funds to inject into the market has also changed. At the end of 2024, the People’s Bank of China introduced a special re-lending facility worth 300 billion yuan to support listed companies and major shareholders in buying back their own shares and increasing their equity stakes. Under this structure, when banks lend funds to listed companies and major shareholders for share purchases, the People’s Bank of China provides those funds back at a low annual interest rate of 1.75%.

China Guoxin and China Chengtong are also utilizing this special re-lending facility, along with their own funds, to purchase shares. Rather than the government temporarily raising bailout funds every time the stock market crashes, as in the past, a standing policy tool has been established that allows for repeated share purchases as needed.

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Purchases by state-owned capital can help stabilize investor sentiment during sharp market declines and protect the financing conditions of strategic companies. On the other hand, if expectations take hold that the government will ultimately prop up the tech stocks it has selected, investors are more likely to chase the government’s purchase targets rather than focus on corporate performance.

A 2015 study analyzing the intervention of the “national team” also found that while government stock purchases reduced volatility in the short term, they weakened the ability of stock prices to reflect a company’s actual value. This was because investors used whether the “national team” was buying as a criterion for judging stock prices, rather than performance and growth potential.

The ability to foster the technology industry by providing long-term capital to state-selected companies is a strength of China’s capital market. However, if the state steps in as a buyer every time stock prices fall, the market will focus first on which industries the government intends to rescue rather than on corporate performance. As the role of the “national team” expands, the stability gained by the Chinese stock market will inevitably increase alongside the loss of market efficiency.