Concerns over valuations of artificial intelligence companies have rocked China’s stock market in recent weeks, posing a major test for Beijing’s efforts to engineer a steady upward trend, known as a “long bull.”
Policymakers’ main defense against volatility is a so-called national team of state-owned investment companies that directly intervene in the market, buying and selling stocks and exchange traded funds (ETFs). The team arguably faces its biggest test yet as speculative bets on AI stocks create major swings, just as some of the biggest tech champions are set to make their debuts.
“People might get excited: Stock prices can go up a lot in six months, then come down a lot in the next six months,” said Arthur Budaghyan, chief emerging markets strategist at BCA Research. “It will create these boom bust cycles in Chinese stocks, and it will be harder for the government to manage it.”
The national team emerged as recently as July 19, about a week before the listing of memory chip maker ChangXin Memory Technologies (CXMT). Chip stocks in South Korea and Japan had fallen sharply, sending shock waves to China and casting a shadow over Asia’s biggest IPO of the year so far.
State-owned financial conglomerates China Reform Holdings and China Chengtong Holdings declared they were “firmly optimistic” about equities and deployed RMB 60 billion (USD 8.9 billion) to stabilize the market using a relending facility backed by the People’s Bank of China, the central bank. Scarlett Liu, Asia Pacific equity derivatives strategist at BNP Paribas, said the move sent a “medium-term bullish signal” to investors.
Beijing did not stop there. Wu Qing, chairman of the China Securities Regulatory Commission, held a meeting with investors in Beijing on July 20. The investors noted the market volatility was driven by “imported risks from overseas.” Wu said he was “fully committed to maintaining the stable operation of the capital market.”
Insurance companies made similarly optimistic statements and dozens of companies, including heavyweight Contemporary Amperex Technology, a battery manufacturer, began announcing share buybacks. Shares rebounded. CXMT’s stock price rose more than fivefold in its trading debut on July 27, making it the largest listed company in mainland China by market capitalization.
Chip stocks in Asia continued to wobble in the following days, but CXMT was resilient. Overall, the Shanghai Stock Exchange Composite Index has dropped about 4% since July. Fluctuations are modest compared with South Korea’s KOSPI or Japan’s Nikkei 225, which fell by around 27% and 7%, respectively.
Analysts point to ETF flows, which indicate the national team has been actively supporting the stock market since July, with a particular focus on tech stocks.
Two ETFs that track the Shanghai Star 50 and Shenzhen ChiNext indexes logged a record RMB 73.7 billion (USD 10.9 billion) in net buying in July, according to data provider Wind Information. An ETF tracking the broader CSI 300 index posted record net outflows in January, hinting that the national team is rebalancing its portfolio by adding more tech shares.
“Given that money was flowing into the ETFs even though investors were generally bearish, it is natural to assume that government funds were being directed toward tech-oriented stocks,” said Hiroya Yamauchi, China and Asia market specialist at Amova Asset Management.
The Chinese government’s coordinated response to the sell-off was the first since April 2025, when US President Donald Trump’s tariffs spooked global markets. National team interventions are becoming “more sophisticated over time,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
He said that policymakers have become increasingly focused on building long-term investor confidence instead of bluntly trying to stop stocks from falling. In practice, that means using interventions to soften the pace of the declines and prevent downward spirals that trigger margin calls, leading to more forced selling.
The strategy is built on painful lessons of the past. In 2015, leveraged bets by retail traders drove stocks to dizzying heights. Regulators cracked down on margin financing, causing a liquidity crunch and sending stocks plunging. This created the perception that Chinese equities were a dangerous asset class, in turn leading top officials to call for steps to limit financial risks.
The shift to a more supportive stance was reflected in CSRC chairman Wu’s comments in September 2024, when he said the capital market will be utilized to “serve the recovery of the real economy, and its high-quality development.” Defending the stock market has become an important policy objective, Budaghyan said, to bolster confidence that has been hit by an economic slowdown in China.
An online commentary by state broadcaster CCTV in January this year stressed that China’s onshore stock market needs a “long-term bull,” not a “crazy bull.”
In addition to outright interventions, regulators can try to prop up the market by encouraging brokers and insurance companies to use the central bank’s swap facility, which allows them to borrow funds to buy shares by putting up a part of their portfolio as collateral, according to BNP’s Liu. She added that they can also ease minimum margin financing requirements, which they tightened to 100% in January, or slow the pace of IPOs.
Beijing will likely be tested again as several high-profile tech companies, including memory chip maker Yangtze Memory Technologies (YMTC) and humanoid robot maker Unitree Robotics, prepare to go public. AI model developer MiniMax, which is already listed in Hong Kong, has also announced plans to list its shares in Shanghai.
The proportion, by value, of tech-related industries in China’s stock market has been growing steadily as that of consumer-related companies and property developers shrinks, reflecting sluggish household spending and limited expectations for additional policy support. The total market cap of chip-related companies stood at RMB 14.15 trillion (USD 2.1 trillion) as of August 13, nearly tripling from a year ago and matching the value of banks, according to Wind.
Insurance companies and other institutional investors will likely face a difficult balancing act: trying to fulfill Beijing’s objectives, while also generating returns by selling their portfolio of tech company shares.
“Without viable options to invest outside the tech sector, such as in domestic demand-related industries, there is a high likelihood of increased market volatility,” Yamauchi said. “There is a sense that SOEs (state-owned enterprises) and state-affiliated companies need to support the tech sector.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.
Note: RMB figures are converted to USD at rates of RMB 6.75 = USD 1 based on estimates as of August 17, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.