SCIO briefing on actively encouraging the flow of medium- and long-term funds into the capital market and promoting its high-quality development

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Speakers:

Mr. Wu Qing, chairman of the China Securities Regulatory Commission (CSRC)

Mr. Liao Min, vice minister of finance

Mr. Li Zhong, vice minister of human resources and social security

Mr. Zou Lan, member of the Party Committee of the People's Bank of China (PBC)

Mr. Xiao Yuanqi, vice minister of the National Financial Regulatory Administration (NFRA)

Chairperson:

Ms. Shou Xiaoli, director general of the Press Bureau of the State Council Information Office (SCIO) and spokesperson of the SCIO

Date:

Jan. 23, 2025

Shou Xiaoli:

Ladies and gentlemen, good morning. Welcome to this press conference held by the State Council Information Office (SCIO). Today, we are delighted to have with us Mr. Wu Qing, chairman of the China Securities Regulatory Commission (CSRC); Mr. Liao Min, vice minister of finance; Mr. Li Zhong, vice minister of human resources and social security; Mr. Zou Lan, member of the Party Committee of the People's Bank of China (PBC); and Mr. Xiao Yuanqi, vice minister of the National Financial Regulatory Administration (NFRA). They will brief you on actively encouraging the flow of medium- and long-term funds into the capital market and promoting its high-quality development, and take your questions.

Now, I'll give the floor to Mr. Wu for his introduction.

Wu Qing:

Thank you. Ladies and gentlemen, friends from the media, good morning. As we approach Spring Festival and the Year of the Snake, it is a great pleasure to meet you again here at the SCIO. I would like to take this opportunity to extend my Chinese New Year greetings to you in advance, and also to express my sincere appreciation for your long-term interest in and support for the capital market. Today is the 24th day of the 12th lunar month, which marks the Little New Year in southern China, while yesterday was the Little New Year in the north. Major matters brook no delay, let alone being postponed until after the Chinese New Year, so we are racing against time. The main purpose of today's press conference is to brief you on the Implementation Plan for Encouraging the Flow of Medium- and Long-Term Funds into the Capital Market, which was reviewed and approved at the plenary meeting of the Central Financial Commission (CFC) and jointly issued by six ministries and commissions, with a press release issued yesterday afternoon. At today's press conference, together with my colleagues from the Ministry of Finance (MOF), the Ministry of Human Resources and Social Security (MOHRSS), the PBC and the NFRA, which are responsible for drafting the implementation plan, we will introduce the background, main content and related work in the plan, and answer your questions.

As everyone knows, medium- and long-term funds are an important professional investment force in the capital market, serving as a "ballast" and a "stabilizer" to help maintain the market's stable and healthy operation. The Central Committee of the Communist Party of China (CPC) with Comrade Xi Jinping at its core attaches great importance to the work of encouraging medium- and long-term funds to enter the market. The third plenary session of the 20th CPC Central Committee explicitly called for improving the capital market's functions to give balanced weight to investment and financing and supporting the entry of long-term funds into the market. The meeting of the Political Bureau of the CPC Central Committee on Sept. 26 last year and the subsequent Central Economic Work Conference made clear deployments, emphasizing the need to stabilize the stock market, deepen comprehensive reforms for capital market financing and investment, and remove bottlenecks and obstacles restricting medium- and long-term funds from entering the market. At the end of September last year, the Office of the Central Financial Commission and the CSRC jointly issued guidance on encouraging the flow of medium- and long-term funds into the market, which clarified the key work arrangements for promoting various types of medium- and long-term funds to enter the market and for establishing an institutional environment of "long money for long-term investment." The implementation of the guidance, together with a package of incremental policies, including monetary policy tools supporting the capital market, has played a strong role in stabilizing the market and helped guide it toward steady improvement.

This implementation plan is not only another important measure to thoroughly implement the CPC Central Committee's decisions and deployments on encouraging medium- and long-term funds to enter the market, but also a refinement, deepening and concrete implementation of the previous guidance. The implementation plan focuses on bottlenecks and obstacles for medium- and long-term funds such as public funds, commercial insurance funds, and pension funds in entering the market, and proposes a series of more concrete measures. It addresses both the present and the future. In the short term, it sets out specific and clear target requirements for the actual scale and proportion of various types of medium- and long-term funds investing in A-shares; and in the long term, it makes targeted institutional arrangements regarding assessment systems, investment policies, and market ecosystem construction that are adapted to long-term investment. In short, it is packed with substantial content. There are several key points:

First, increasing the actual investment proportion. After careful study and analysis, specific arrangements have been clarified to steadily raise the scale and proportion of medium- and long-term funds investing in A-shares. For public funds, it is stipulated that the tradable A-share market capitalization held by public funds should increase by at least 10% each year over the next three years. For commercial insurance funds, large state-owned insurance companies are expected to allocate 30% of their newly collected premiums each year from 2025 onward to invest in A-shares. This means that several hundred billion yuan of long-term funds will be added to the A-share market each year. The second batch of long-term stock investment pilots for insurance funds will be implemented in the first half of 2025, with a scale of no less than 100 billion yuan, and will be gradually expanded thereafter.

Second, the assessment cycle has been extended. A short assessment cycle has for many years been a significant constraint limiting the expansion of commercial insurance funds, annuity funds, and other medium- to long-term capital into the A-share market. Implementing a long-cycle assessment can effectively smooth out the impact of short-term market fluctuations on performance. Although the fund is designed for long-term investment, short assessment cycles make it difficult to maintain such an approach. By adjusting the assessment cycle, the stability of medium- and long-term fund investment behavior can be improved. The new implementation plan further proposes that public funds, state-owned commercial insurance companies, basic pension insurance funds, annuity funds and similar institutions fully adopt an assessment cycle of more than three years, significantly reduce the weight of current annual operating indicators for state-owned commercial insurance companies, and clearly define the five-year assessment cycle arrangement for the national social security fund. This is a very important institutional breakthrough for medium- and long-term funds entering the market, solving a problem that has remained unresolved for many years. From practical experiences both at home and abroad, this is also conducive to improving the investment returns of various medium- and long-term funds, fostering a win-win situation. For example, the national social security fund is the most active long-term fund participating in stock investment domestically. Over the past 20 years, the average annualized return on investment in A-shares has reached 11.6%, which is very high. This is mainly due to the social security fund's commitment to value investment and long-term investment, and the experience is worth carefully analyzing and referencing.

Third, we have further consolidated the joint force to implement incremental policies. Vigorously guiding medium- and long-term funds into the market is a systematic project. During the formulation of the implementation plan, the Central Financial Office strengthened overall coordination. Departments such as the MOF, MOHRSS, PBOC, NFRA and the Social Security Fund Council closely cooperated with us, innovatively carried out its work, and jointly promoted the formation of the specific and powerful measures introduced just now. This is also an important and long-term institutional reform. In the subsequent implementation process, we will continue to strengthen communication and collaboration, and enhance tracking and evaluation of the results.

We believe that, under the strong leadership of the CPC Central Committee and the State Council, and with robust support from all sectors, the rolling out of the implementation plan will further enhance the equity allocation capabilities of medium- and long-term funds, steadily expand investment scale, improve the supply and structure of capital market funds, and consolidate the good momentum of the capital market's recovery and improvement. It will also help medium- and long-term funds to enhance long-term investment returns, better practice the concepts of long-term, value-based, and rational investment, and achieve the preservation and appreciation of medium- and long-term funds, maintaining the stable and healthy operation of the capital market and fostering a virtuous cycle of the high-quality development of the real economy.

Thank you. That concludes my introduction.

Shou Xiaoli:

Thank you, Mr. Wu, for your introduction. Now, the floor is open for questions. Please identify the media outlet you represent before asking your question.