Beijing is deploying billions of dollars through state-backed entities to stabilize China’s falling stock market. Central Huijin Investment, a primary market stabilization vehicle, has announced it is increasing its A-share holdings to provide “patient capital and long-term capital”. This move is similar to the 2015 playbook, when a coalition of state entities stepped in with enormous firepower to stabilize the market. China Securities Finance Corp and Central Huijin acquired stakes in over 1,000 companies, spending an estimated RMB 1.6 trillion.
Market Stabilization
By the end of Q3 2015, those holdings represented about 4.3% of the entire market capitalization of domestically listed firms. Historical analysis shows those interventions reduced stock price volatility by approximately 3.45% on average for targeted shares. China’s equity markets are dominated by retail investors who tend to move in herds, amplifying both rallies and selloffs. The 2015 intervention stabilized markets in the short term but left the government holding enormous positions in companies it never intended to own.
Crypto Exclusion
None of this state firepower is flowing anywhere near digital assets, as China has banned crypto exchanges, initial coin offerings, and declared all cryptocurrency transactions illegal. Beijing is using blockchain technology for state-endorsed applications, but permissionless assets remain unwelcome. Investors should watch how long the current buying campaign lasts and how large the positions grow, as this could indicate the severity of the selloff
Based on reporting from cryptobriefing.com.
