The recent discussions among key financial policymakers in China have emphasized the need to bolster the entry of long-term capital into the marketThe overarching goal is to enhance the quality of development within the capital sector, ensuring that it operates smoothly and healthilyAs such, both fiscal and monetary policies are set to play a pivotal role in this endeavor.

The Ministry of Finance is poised to take decisive measures aimed at guiding state-owned commercial insurance companies towards more robust long-term and value-oriented investmentsThis initiative includes an overhaul of the investment evaluation metrics for the national social security fund, ensuring that it is aligned with contemporary market needsMeanwhile, the People’s Bank of China is expected to continually refine policies that facilitate the efficient use of monetary tools designed to support capital market activities

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This may involve expanding the variety and quantities of tools at their disposal when the conditions are right.

One of the critical components of this strategy involves revising the long-cycle assessment system for state-owned commercial insurance companiesSuch an adjustment is instrumental in encouraging these entities to engage more actively in medium- to long-term investments through capital marketsDeputy Minister of Finance, Liao Min, has provided insights into upcoming changes, indicating that there will be a renewed focus on sustainable and prudent management by these insurance companies.

The proposed revisions address how performance metrics are evaluated over longer periodsA significant aspect is the increased weighting given to operating efficiency indicatorsFor example, the long-term assessment weight for "Return on Net Assets" will be adjusted to at least 60%. This change is designed to draw a more substantial pool of medium- to long-term funds into the capital market, effectively aligning assessment cycles with the investment horizons relevant to long-term capital.

Moreover, the introduction of a long-term assessment for state capital preservation and appreciation is another major focus

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By combining short- and long-term assessment methods, the initiative seeks to encourage state-owned commercial insurance companies to widen their scale of long-term investments, thereby stabilizing owners' equity and ensuring the growth of state capital.

Another important shift will encourage these companies to enhance their investment management capabilitiesBy reinforcing their financial operations, these insurance firms are expected to invest their funds more effectively over extended periodsLiao has expressed confidence that these comprehensive initiatives will lead to a more steadfast approach to investment, emphasizing stable operations and maximizing the positive impact of insurance funds within the capital market.

On a broader scale, the National Social Security Fund (NSSF) will also be undergoing a modernized evaluation approachAccording to Liao, the Ministry of Finance has been focused on refining the investment management guidelines for the NSSF, which governs considerable resources intended for social welfare

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This revision process is currently inviting feedback from the community, aiming to enhance operational flexibility and investment strength.

It is noteworthy that the adjusted policies will take into account the evolving landscape of financial marketsThe new regulations are designed to optimize the variety of investment products and improve the overall dynamism of national social security fund investmentsThese measures promise a more flexible and forceful approach to how the fund engages within the market.

Furthermore, the Ministry is working to establish a long-term assessment framework for the NSSF's investment operationsAimed at executing a more granular evaluation mechanism, this system will include risk management and value preservation as key performance indicatorsThe approach strives to balance short-term gains with long-term stability and growth, reinforcing a commitment to sustainable capital market development.

In addition to these fiscal adjustments, monetary policy tools are set to expand in line with these objectives

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In 2024, the People's Bank of China launched two innovative monetary policy tools designed to foster stability within the capital market: the interchange facility for securities, funds, and insurance companies along with stock repurchase loan incentives.

These two tools have already demonstrated progress in contributing to a stable market environment and boosting investor confidence, according to Zhao Lan, a representative of the central bankThe next phase will see the central bank collaborating with relevant authorities to further refine these mechanisms, ensuring they remain user-friendly and accessibleThe goal here is to provide businesses and organizations with timely access to adequate long-term financing, thereby enabling meaningful investments when required.

Zhao further elaborated on the positive reception and operational success of these newly introduced instruments

Two significant rounds of operations under the securities-fund-insurance swap scheme have already shifted a total of 105 billion yuan into the market, effectively facilitating stock purchases by financial entitiesThe second operation alone in January allocated 55 billion yuan, which industry organizations have readily used to finance stock buybacks.

Amid considerable policy backing, brokerage firms are witnessing significant growth in their self-managed stock investment activitiesFollowing several months of operational refinement, the business processes governing these tools are functioning seamlesslyZhao anticipates that with ample policy latitude, both the scale and responsiveness of these financial operations will witness substantial enhancements.

The stock repurchase loan has also garnered extensive market enthusiasmIn response to community feedback and market demand, the People's Bank of China has incrementally adjusted the criteria for these loans

Among the changes, the required proportion of the own funds when applying for a loan has been reduced from 30% down to 10%. The maximum loan tenure has been extended from one year to three years, while incentives for banks to issue these loans have been enhanced.

Zhao revealed that almost 800 publicly-listed companies have already entered into agreements with financial institutions regarding these loansMoreover, over 300 companies have openly expressed intentions to apply for stock repurchase loans, with intended amounts exceeding 60 billion yuanNotably, companies with market capitalizations of over 10 billion yuan comprise over 40% of this group, indicating a strong appetite for these financing options that come with an attractively low interest rate averaging around 2%.

As China navigates these changes, the vision for a robust, sustained capital market is clearer than ever