China’s central bank has stated its intent to provide financial support to Central Huijin Investment, a substantial arm of the country’s sovereign wealth fund, to ensure stability in the capital markets amid ongoing trade disputes with the US.
The People’s Bank of China (PBOC) is prepared to deliver assistance through a re-lending mechanism designed to bolster market conditions impacted by US tariffs.
Central Huijin Investment announced its strategy to purchase shares listed in China via exchange-traded funds (ETFs), aiming to reinforce local markets affected by the tariff measures implemented by US President Donald Trump.
The trade dispute heightened when Trump indicated plans for additional tariffs on Chinese goods, resulting in notable market declines.
The Shanghai Composite Index recorded a significant drop of 7% on Monday, marking its steepest decline in five years, reported Reuters. This reaction followed the US’s decision to impose a 34% tariff on imports from China, which led to a reciprocal response from Beijing.
The subsequent market instability prompted intervention by Central Huijin and other state-backed entities, collectively known as the “National Team,” to offer market support.
Central Huijin’s ETF acquisitions form part of an overarching initiative to maintain the orderly functioning of China’s capital markets. Although the market faced volatility, Chinese stocks saw some recovery due to interventions by Huijin, experiencing a 7.6% decline since Trump’s tariff announcement, which is a moderate dip when compared to Japan’s Nikkei index.
The PBOC’s decision to extend financial backing underscores its role in safeguarding economic stability amid market disruptions. Historically, Central Huijin has engaged in similar interventions during periods of financial stress, maintaining ETF assets valued at approximately CNY 1 trillion ($137bn) as reported at the end of last year by Guosen Securities.
