Industry Voice: Market Stabilization Mechanism Has Become the Stabilizing Force of A-Shares!

Since the 2025 government work report first included “stabilizing the stock market” as a key requirement, and by 2026, CSRC Chairman Wu Qing proposed “improving the construction of a Chinese-style market stabilization mechanism,” the policy language has evolved, reflecting changes in China’s top-level design for the capital market.

Recently, several chief analysts from securities firms and scholars interviewed by Securities Times unanimously agreed that China’s measures to stabilize the market are shifting from temporary responses to short-term fluctuations to building a long-term, stable institutional system. This also demonstrates the regulatory authorities’ firm commitment to continuously optimizing the ecosystem of the capital market.

Regarding how to further improve the market stabilization mechanism based on existing practices and lay a solid institutional foundation for high-quality development, interviewees shared their observations and suggestions with Securities Times.

Market stabilization mechanisms have become the “North Star” of A-shares

The Chinese-style market stabilization mechanism has long begun to take shape.

Since September 24, 2024, regulators have introduced a series of stabilization tools, including central Huijin increasing holdings of index funds, the PBOC establishing securities, funds, and insurance company swap facilities and repurchase and re-lending tools, as well as listed companies repurchasing shares. These measures have effectively reversed the downturn in the A-share market.

Duan Chao, Chief Macro Analyst at Industrial Securities, said that from market performance, these stabilization measures have effectively reversed short-term pessimistic expectations. The total market capitalization of A-shares increased from 6.8 trillion yuan to 11 trillion yuan, and the Shanghai Composite Index rose from around 2,700 points to 4,100 points. Investor confidence has significantly improved, and the systemic support function has been fully unleashed.

“These policy combinations not only curb irrational short-term volatility but also reshape the underlying logic of liquidity transmission and valuation ecology in A-shares. These tools serve as ‘stabilizers’ for the capital market and also lay a solid foundation for subsequent fiscal efforts and domestic demand recovery,” said Zhao Wei, Chief Economist at Shenwan Hongyuan.

Zhongyou Securities Vice President and Chief Economist Huang Fusheng also noted that the stabilization measures launched since September 24, 2024, have played a significant role in stabilizing the market and restoring confidence. Their importance lies not only in short-term support but also in initiating institutional exploration of market stabilization methods.

“These tools combine short-term and long-term efforts, working together to both provide immediate support and stimulate endogenous stability among market participants, marking a move toward market-oriented, diversified, and mechanized stabilization approaches,” Huang Fusheng said.

From emergency tools to routine mechanisms

The Chinese-style market stabilization mechanism is expected to become more systematic and normalized.

Recently, at the Fourth Session of the 14th National People’s Congress, during a press conference on economic topics, CSRC Chairman Wu Qing stated the need to “improve the construction of a Chinese-style market stabilization mechanism, enrich cross-cycle and counter-cyclical adjustment methods and mechanisms, and further enhance the market’s inherent stability.”

From aiming to “stabilize the stock market” to explicitly proposing “improving the Chinese-style stabilization mechanism,” the regulatory stance has subtly shifted.

Huang Fusheng commented that this evolution signals a clear strategic transformation. The stability work in the capital market is shifting from reactive “rescue” measures to systematic “building,” moving from passive responses to fluctuations toward proactively constructing an internal stable structure. The core goal is to establish a long-term, effective mechanism that suits China’s national conditions, covering the entire process before, during, and after market fluctuations, with functions for prevention and repair.

Zhao Wei believes that this evolution in wording indicates a further shift in top-level design toward proactive institutional development. Market stabilization measures are upgrading from emergency “toolboxes” to routine institutional guarantees.

National People’s Congress deputy and Peking University Bo Ya Distinguished Professor Tian Xuan said this marks a transition from temporary measures to address short-term fluctuations toward building a long-term stable institutional system. Regulators will take a more proactive and systematic approach to maintaining market stability.

Jiang Xuehong, Vice General Manager of Ping An Securities, also mentioned that regulators are committed to building a more mature and stable market mechanism based on previous stabilization practices, with a firm determination to continuously optimize the ecosystem.

Duan Chao added that this represents a significant leap in the top-level design of the capital market toward “proactive institutional development.” Market stabilization measures are upgrading from emergency “toolboxes” to routine institutional guarantees, providing long-term liquidity support and solid financial foundations for long-term capital inflows.

Enriching cross-cycle and counter-cyclical adjustment tools and mechanisms

Enriching cross-cycle and counter-cyclical adjustment tools and mechanisms to further enhance market internal stability is a complex process. Industry insiders also have many suggestions and expectations for how to build a Chinese-style stabilization mechanism.

Zhang Jun, Chief Economist at China Galaxy Securities, emphasized the need for systematic policy improvement: first, continuously optimize investor structure, strengthen financial intermediary functions and management capabilities, and vigorously develop equity-based public funds; second, improve the “long-term capital investment” system, increase the proportion of long-term funds like social security and insurance entering the market, with supporting tax incentives and assessment reforms; third, build a flexible linkage system for issuance, trading, and delisting to dynamically balance financing and investment functions; fourth, establish expectations management mechanisms, strengthen policy communication and interpretation, and guide listed companies to increase dividends and optimize buybacks to stabilize long-term market expectations.

Huang Fusheng suggested that the current key is to ensure the effective implementation of existing policies. In terms of strengthening micro-foundations, efforts should focus on improving the quality of listed companies, strengthening information disclosure regulation, cracking down on financial fraud, and actively guiding companies to increase dividends and optimize buybacks, making enterprises an important force in market stability.

Regarding investor structure, policies should be fully implemented to encourage long-term capital entry, establish long-term assessment mechanisms of over three years, unblock entry points for insurance and pension funds, and promote long-term investment concepts, playing the role of a “ballast stone.”

Tian Xuan proposed a phased approach to cultivating institutional investors, accelerating the development of the third pillar of pension funds, institutionalizing long-term allocations of insurance funds, and increasing the proportion of equities in bank wealth management subsidiaries.

He also suggested optimizing expectations management, establishing a normalized, tiered, and categorized policy communication mechanism; and trialing A-share market volatility warning and response mechanisms, with dynamic triggers for interventions such as stabilization fund actions and buyback guidance, supported by policy responses and institutional resilience to boost market confidence.

“The core elements of the Chinese-style market stabilization mechanism mainly include a high-quality group of listed companies, efficient policy coordination, a well-structured investor base, high-quality financial services, strict regulatory enforcement, and routine, transparent operation mechanisms,” Jiang Xuehong said.

Duan Chao added that the core elements should include: first, reshaping asset-side return expectations to improve “investability” through better corporate quality, mandatory dividends, and encouraged voluntary buybacks; second, building a “long-term capital” ecological loop, addressing obstacles to long-term funds entering the market and assessment barriers, guiding “patient capital” to play a stabilizing role; third, enhancing cross-cycle and counter-cyclical policy tools by dynamically optimizing financing and margin trading mechanisms and improving quantitative trading regulation to strengthen the market’s ability to adjust across and against cycles.

“Overall, the Chinese-style market stabilization mechanism fundamentally aims to enhance market resilience and endogenous stability through institutional arrangements, laying a solid foundation for high-quality development,” Duan Chao concluded.