China’s top market regulator strikes positive tone as investors brace for turbulence

China’s top market regulator said that he had held two discussions with securities firms and asset managers to urge them to better serve the demand for investment and financing.

Wu Qing, the chairman of the China Securities Regulatory Commission, urged the firms to enhance their capabilities in professional services including investment banking and research, while strengthening risk controls for new products.

The statement signals a positive tone after China’s top legislative body approved a 6 trillion yuan (US$835 billion) package to help local governments swap their hidden debt, which has accumulated through years of unchecked infrastructure development and spending on measures to manage the Covid-19 pandemic.

The Chinese capital market is showing signs of recovery and resilience, said the CSRC statement, released on Sunday.

“With the further strengthening of countercyclical adjustments in fiscal and monetary policies, the macro economy is expected to continue to improve, providing a solid foundation and conditions for maintaining the stable and healthy development of the capital market,” it said.

Beijing estimates that the amount of hidden debt stands at around 14 trillion yuan, but some banks estimate it is between 50 trillion and 60 trillion yuan.

In April this year, the State Council introduced unprecedented measures that emphasised the importance of risk prevention and supervision for initial public offerings (IPOs) and fund management.

In China’s A-share market – where yuan-denominated shares are traded by domestic investors – the number of IPOs and the amount they have raised are at a multi-year low. In Hong Kong, IPOs regained some momentum in recent months after the city fell to eighth place among listing venues worldwide in 2023.

A slew of incentive measures to boost the Chinese economy since late September prodded the Chinese stock market into a bull run, but the rally lost steam in recent weeks. Last week, the re-election of Donald Trump, who has threatened higher tariffs from all products made in China, further imperilled sentiment.

However, some analysts said there was reason to believe that more economic relief is on the way, and finance minister Lan Foan said supportive policies could be more proactive next year.