Since the 2025 Government Work Report first included "stabilizing the stock market" as a general requirement, and the 2026 proposal by CSRC Chairman Wu Qing to "enhance the development of market stabilization mechanisms with Chinese characteristics," the evolution in policy terminology reflects a shift in the top-level design philosophy of China's capital markets. Recently, multiple chief economists from securities firms and scholars unanimously expressed that China's market stabilization measures are transitioning from temporary actions addressing short-term fluctuations toward building a long-term, stable institutional framework. This also demonstrates regulators' firm determination to continuously optimize the ecosystem of the capital market. Regarding how to further improve the stabilization mechanisms based on existing practices and lay an institutional foundation for high-quality development of the capital market, interviewees shared their observations and suggestions.
Market stabilization mechanisms with Chinese characteristics have already demonstrated their significance. Since September 24, 2024, regulators introduced a package of stabilization tools, including increased holdings of index funds by Central Huijin, the establishment of swap facilities for securities, funds, and insurance companies by the central bank, relending tools for share buybacks and increased holdings, as well as corporate repurchases. These measures successfully reversed the downward trend of the A-share market. According to Duan Chao, chief macro analyst at Industrial Securities, these stabilization policies effectively reversed short-term pessimistic expectations from a market performance perspective. The total market capitalization of A-shares grew from 68 trillion yuan to 110 trillion yuan, while the Shanghai Composite Index rose from around 2,700 points to 4,100 points, significantly boosting investor confidence and fully unleashing the institutional underpinning function.
The policy mix not only curbed irrational fluctuations in the capital market in the short term but also reshaped the liquidity transmission mechanism and valuation ecology of A-shares at a fundamental level. These tools act as "stabilizers" for the capital market and also lay a solid foundation for subsequent fiscal efforts and domestic demand recovery, stated Zhao Wei, chief economist at Shenwan Hongyuan. Huang Fusheng, vice president and chief economist at China Post Securities, also noted that the stabilization measures introduced since September 24, 2024, played a significant role in stabilizing the market and restoring confidence. Their importance lies not only in short-term support but also in initiating the institutional exploration of stabilization methods.
These tools combine short- and long-term measures, working synergistically to provide immediate support while stimulating endogenous stabilization动力 from market entities. This marks a shift of stabilization methods toward marketization, combination, and institutionalization, Huang added.
The market stabilization mechanism with Chinese characteristics is expected to become further systematized and regularized. Not long ago, at the economic-themed press conference of the Fourth Session of the 14th National People's Congress, CSRC Chairman Wu Qing stated the need to "enhance the development of market stabilization mechanisms with Chinese characteristics, enrich cross-cycle and counter-cyclical adjustment tools and mechanisms, and further strengthen the intrinsic stability of the market." The change in regulatory tone, from aiming to "stabilize the stock market" to explicitly proposing to "enhance the development of market stabilization mechanisms with Chinese characteristics," signifies an evolution. According to Huang Fusheng, this progression sends a clear signal of strategic transformation. Stability efforts in the capital market are shifting from emergency-style "market rescue" to systematic "institution building," moving from passively responding to volatility to actively constructing an internally stable market structure. The core objective is to establish a long-term mechanism adapted to China's national conditions, covering the entire chain ex-ante, during, and ex-post, possessing preventive and restorative functions.
Zhao Wei believes this evolution in terminology marks a further turn in the top-level design of the capital market towards proactive institutional construction. Stabilization measures are being upgraded from an emergency "toolbox" to a regularized institutional safeguard. Tian Xuan, NPC deputy and Boya Distinguished Professor at Peking University, stated that this signifies a shift in China's capital market governance from temporary measures addressing short-term fluctuations to building a long-term stable institutional system. Regulators will maintain market stability more proactively and systematically. Jiang Xuehong, deputy general manager of Ping An Securities, also mentioned that regulators are committed to building a more mature and established capital market stabilization mechanism based on previous practices, demonstrating a firm resolve to continuously optimize the capital market ecosystem.
Duan Chao added that this marks a significant leap in the top-level design of the capital market towards "proactive institutional construction." Stabilization measures are being upgraded from an emergency "toolbox" to a regularized institutional safeguard, providing long-term protection against negative liquidity feedback loops and building a solid financial foundation for long-term capital market entry.
Enriching cross-cycle and counter-cyclical adjustment tools and mechanisms to enhance the market's intrinsic stability is not an overnight task. Industry insiders have many suggestions and expectations regarding how to build a market stabilization mechanism with Chinese characteristics. Zhang Jun, chief economist at China Galaxy Securities, suggested systematic promotion of policy improvement: First, continuously promote the optimization of investor structure, strengthen the function and management capabilities of financial intermediaries, and vigorously develop equity-oriented public funds. Second, improve the institutional arrangements for "long-term money, long-term investment," increase the proportion of long-term funds such as social security and insurance entering the market, supported by tax incentives and assessment reforms, to strengthen the support from long-term capital. Third, build a flexible adjustment system linking issuance, trading, and delisting to dynamically balance financing and investment functions. Fourth, improve expectation management mechanisms, enhance policy communication and interpretation, guide listed companies to strengthen dividend returns, and stabilize long-term market expectations.
Huang Fusheng suggested that the current key lies in effectively implementing existing policies. In terms of consolidating the micro-foundation, deeply advance actions to improve the quality of listed companies, strengthen information disclosure supervision, and crack down severely on financial fraud. Simultaneously, actively guide listed companies to increase dividends and optimize buybacks, allowing the companies themselves to become an important force for market stability. Regarding optimizing investor structure, fully implement policies for medium- and long-term capital market entry, improve assessment mechanisms for cycles of three years or longer, remove obstacles for insurance and pension funds to enter the market, guide the establishment of long-term investment concepts, and effectively play the role of "ballast."
Tian Xuan recommended promoting a phased institutional investor cultivation plan, accelerating the development of the third pillar of pensions and institutionalizing long-term allocation of insurance funds, and encouraging bank wealth management subsidiaries to increase the proportion of equity asset allocations. Concurrently, he advised optimizing expectation management by establishing regular, graded policy communication mechanisms. He also proposed trialing an A-share market volatility early warning and response mechanism, dynamically triggering intervention tools such as stabilization funds and buyback/增持 guidelines, using policy responsiveness and institutional resilience to bolster market confidence.
"The core elements of the market stabilization mechanism with Chinese characteristics mainly include a high-quality cohort of listed companies, efficient policy coordination capabilities, a reasonably structured investor base, high-quality and efficient financial service provision, a strict and standardized regulatory enforcement system, and a regularized, transparent operational mechanism," stated Jiang Xuehong.
Duan Chao believes the core elements of the "market stabilization mechanism with Chinese characteristics" should include the following aspects: First, reshaping return expectations on the asset side, enhancing corporate "investability" by improving the quality of listed companies, enforcing dividends, and encouraging value-accretive buybacks to improve shareholder returns. Second, building an ecological closed-loop for "long-term money, long-term investment," focusing on resolving obstacles to the entry and assessment of medium- to long-term capital, and guiding "patient capital" to effectively play its role as ballast. Third, improving the policy toolbox for cross-cycle and counter-cyclical adjustment, by dynamically optimizing margin trading mechanisms and refining the regulatory framework for quantitative trading, to enhance the capital market's ability for cross-cycle and counter-cyclical adjustment.
"Overall, the market stabilization mechanism with Chinese characteristics essentially uses institutional arrangements to enhance market resilience and endogenous stability, laying an institutional foundation for the high-quality development of the capital market," Duan concluded.
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