China’s sovereign wealth fund has stepped in to support domestic stocks that have been plunging due to escalating trade tensions with the United States. Central Huijin Investment, a division of China Investment Corp, announced on Monday that it has increased its holdings in China-listed shares through exchange-traded funds (ETFs) and plans to continue doing so in order to “safeguard the smooth operation of the capital market.”
The intervention comes as the Shanghai Composite Index experienced its worst day in five years, falling 7% on Monday. This decline followed the U.S. imposing additional tariffs of 34% on China last week, which China reciprocated with its own 34% levies.
Investors reacted by broadly dumping shares, concerned about an intensifying trade war and the potential for a global recession. Huijin’s statement provided some relief, helping Chinese stocks recover from earlier losses that had reached as much as 9%. Since President Trump’s tariff announcement, the market has declined by 7.6%, a relatively milder drop compared to Japan’s Nikkei index, which fell by 13%.
In its statement, Huijin expressed firm optimism about the development prospects of China’s capital market and confidence in the current investment value of A-shares.
Sovereign fund supports Chinese stocks
Stock trader Wen Hao, an executive at quant service provider Yingzhiliang Hangzhou Technology, noted that the market has limited room to fall due to state fund support and potential measures such as monetary easing and consumer spending incentives.
However, William Xin, chairman of Spring Mountain Pu Jiang Investment Management, warned that such support might not be sufficient to counteract the effects of an expanding trade war. He highlighted issues companies face, such as placing orders, setting prices, and retaining customers. “Hunting for bargains now is like catching a falling knife, so I would rather hold cash until there’s a bit more stability,” he remarked.
Huijin is part of China’s “National Team” of state-backed investors responsible for stabilizing the market during turbulent times. Other key players include the China Securities Finance Corp and investment vehicles managed by China’s foreign exchange regulator. Huijin had previously intervened with stock purchases via ETFs during a market crash in the spring of 2024, holding ETF investments worth 1 trillion yuan ($137 billion) as of the end of last year.
Trading volumes for ETFs favored by Huijin, such as the Harvest CSI 300 ETF, ChinaAMC CSI 300 ETF, and E Fund SSE 50 ETF, surged to their highest in a year on Monday.
