Beijing pledges market support after US-led tech sell-off
- Beijing's State Council has pledged to improve policy mechanisms to stabilize the struggling stock market.
- The CSI 300 Index fell 1.4% on Friday following a sharp overnight decline on Wall Street.
- US tech stocks dropped on concerns that a Democratic-controlled Congress might increase AI regulation.
- State-backed investors, known as the 'National Team,' have intervened in the market through significant ETF purchases.
- China's government is also focusing on infrastructure, job support, and debt management to bolster the economy.
Beijing called for more efforts to stabilize the stock market on Friday following a renewed sell-off. The State Council pledged improved policy mechanisms to stabilize the struggling stock market during an executive meeting chaired by Premier Li Qiang.
Officials stated at the meeting, "We will enhance the inherent stability of the stock market and foster the steady and healthy development of the capital market". This move aims to address market volatility and improve the country’s capital market mechanisms.
CSI 300 falls 1.4% following Wall Street decline
The CSI 300 Index fell 1.4% on Friday. This decline followed a sharp overnight collapse on Wall Street that erased more than US$2 trillion in market value.
The Nasdaq recorded its largest single-day drop since April 2025. Investors sold stocks due to concerns that a Democratic midterm win could lead to stricter regulation of the artificial intelligence industry.
The technology-driven sell-off spread from the United States to Chinese and Hong Kong markets, heightening concerns that the artificial intelligence boom is losing momentum.
Tech sector and regional markets hit by risk-averse sentiment
The Star 50 gauge, which has significant exposure to Shanghai-traded artificial intelligence chipmakers, fell 2.6% on Friday.
Risk-averse sentiment spread across Asia, causing South Korea's KOSPI to plunge more than 8% and Japan's Nikkei to fall 5%. Chinese artificial intelligence hardware maker Zhongji Innolight fell 8% to a one-year low, and rival Eoptolink Technology tumbled 7%.
National Team intervenes through ETF purchases
China’s National Team of state-backed investors has returned to the market to counter heavy selling pressure. Strategists at Goldman Sachs, Bank of America, and BNP Paribas identified evidence of this state-linked buying activity.
This intervention is concentrated in exchange-traded funds. Goldman Sachs analysts noted that buying accelerated as the market deteriorated, reaching levels that triggered the firm’s national team signal.
State-backed ETF buying supported a recovery in mainland Chinese equities on Friday. Turnover across nine favored funds reached approximately RMB84 billion, or about $12.6 billion. Bargain hunting also helped mainland equities regain some ground following an initial period of heavy selling.
This buying is concentrated in the CSI 300, followed by the STAR50 and ChiNext ETFs.
The market is currently suffering its worst month in more than a decade. This decline stems from a weak domestic economy and doubts surrounding artificial intelligence earnings.
Government announces broader economic support measures
Regulators also pledged to consider easing margin requirements.
Officials at a meeting on Friday discussed infrastructure investment, equipment upgrades, job-market support, and local government debt. It will also ensure debts owed to businesses and local governments are paid in full and on time.
Beijing maintains a commitment to avert systemic financial risks through these policy improvements.
The People’s Bank of China, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and major banks participated in these discussions. Securities firms and funds received notices regarding the meeting, which participants viewed as preparation for further market stabilization actions.
Market performance reflects long-term economic challenges
The CSI 300 Index fell 8.5% in October, marking 12 consecutive weeks of declines and entering bear-market territory. Year-to-date, the Shanghai Composite Index has fallen more than 9%, while the Shenzhen Component Index has dropped more than 19%.
October marked the worst monthly sell-off for the Chinese stock market in 10 years.
This Friday decline ended a two-day rally that began on Wednesday.
Strategic importance of domestic technology development
Beijing views the technology sector as strategically important for its industrial ambitions. This includes the development of domestic alternatives to American AI systems, computing infrastructure, and semiconductors.
A prolonged collapse in technology valuations could hinder the ability of Chinese companies to raise equity capital. It also risks limiting their ability to finance expansion and maintain domestic investor confidence.
Frequently Asked Questions
- Beijing calls for more efforts to stabilise stock market after renewed sell-off | South China Morning Post (scmp.com)
- China, Hong Kong stocks fall as US tech rout sparks AI bubble fears - The Economic Times (m.economictimes.com)
- China’s Plunge Protection Team Regroups as Beijing Moves to Shore Up Stocks (Again) (thedarksideoftheboom.substack.com)
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