Firmly Bullish on China's Capital Markets: Two Major Central SOEs, China Reform and CHINA CHENGTONG, Announce Continued Stake Increases; Previous Move Was in April Last Year

The two major state-owned capital operation platforms have once again acted in sync after approximately 15 months, announcing increased holdings in Chinese equity assets.

On the evening of July 19, China Reform Holdings Corporation Ltd. ("China Reform") and CHINA CHENGTONG Development Group ("CHINA CHENGTONG") sequentially issued announcements, both stating they are "firmly bullish on the development prospects of China's capital markets" and declaring their intention to continue increasing holdings in central SOE stocks and technology-related assets.

China Reform stated it firmly supports technological innovation and high-quality development among central SOEs. Relevant entities under its subsidiary, Guoxin Investment Co., Ltd., have already utilized over RMB 50 billion in special re-lending facilities for stock repurchases and stake increases, along with matching funds, to maintain market stability. In the future, it will continue to make full and effective use of the re-lending policy tool, while also employing proprietary funds to further increase holdings in central SOE stocks, resolutely safeguarding the strategic value of core assets in the capital markets and ensuring their stable and healthy operation.

CHINA CHENGTONG stated that CHINA CHENGTONG and its subsidiaries, Chengtong Capital and Chengyang Investment, have recently focused on substantial increases in holdings of Chinese equity assets by state-owned capital and central SOEs, with cumulative purchases nearing RMB 10 billion. Expressing firm confidence in the prospects of China's economy and capital markets, it will continue to use proprietary funds and special re-lending facilities for stock repurchases and stake increases to significantly boost holdings in stocks and ETFs of state-owned capital, central SOEs, and technology enterprises, making every effort to maintain the stable operation of the capital markets.

This marks the second time the two institutions have publicly announced synchronized stake increases since April 2025. The previous instance occurred on April 7–8, 2025, when A-shares were undergoing their deepest correction since the market rally triggered on September 24, 2024. Following consecutive statements from the two institutions, the market embarked on a sustained uptrend lasting over a year.

Who Are These Two Institutions?

Both China Reform and CHINA CHENGTONG are central SOEs supervised by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council. In early 2016, these two central SOEs were designated as pilot state-owned capital operating companies, and in December 2022, they officially transitioned from the pilot phase to a stage of continuous deepening reform.

The core function of both institutions is "capital management"—rather than deeply engaging in physical manufacturing, they optimize the layout of state-owned capital through equity interests, funds, and financial instruments.

In terms of scale, China Reform's total assets exceed RMB 1 trillion, focusing on technological innovation in central SOEs, strategic emerging industries, and equity value management of listed companies. CHINA CHENGTONG aims to "strive to reach consolidated total assets of around RMB 700 billion and net assets of around RMB 300 billion" by the end of 2025.

Precisely for this reason, the moves of these two institutions in the secondary market are regarded by the market as clear signals from national-level capital.

Direction of Stake Increases: Central SOE Assets and Hard Technology

Judging by the targets of the stake increases outlined in the two announcements, the focus is highly concentrated on two main themes.

The first is core assets of central and state-owned enterprises. China Reform explicitly identified increasing holdings in central SOE stocks as its core objective, aiming to "resolutely safeguard the strategic value of core assets in the capital markets." CHINA CHENGTONG similarly listed state-owned capital and central SOEs as its primary direction for stake increases.

The second is the technology sector. CHINA CHENGTONG directly named increasing holdings in stocks of technology enterprises and science and innovation-themed ETFs as its focus. China Reform stated it "firmly supports technological innovation and high-quality development in central SOEs."

The high concentration of targets in both announcements suggests that "central SOE assets and the technological innovation track may become the core focus of the market."

How the Market Views the Current Position

A research report from CITIC Securities on July 19 pointed out that the current index trend is in "a consolidation phase of a medium-term rally transitioning into the brewing stage of a new rally, with short-term clearing nearly complete."

CITIC Securities further judged that the North American AI supply chain may serve as a safe haven within the technology sector in the short term, with a wave of recovery likely around the time of guidance releases from North American Cloud Service Providers (CSPs) at the end of July. The domestic AI supply chain is highly dependent on catalysts and the intensity of trend-following capital; with major catalysts currently being realized, "valuation convergence from domestic to North American counterparts is a relatively likely trajectory." Non-AI chains are characterized by rotational recovery, starting from innovative drugs and non-bank financial sectors, gradually transitioning to industrial chains such as non-ferrous metals, chemicals, and lithium batteries.

Mainstream institutional views hold that the current correction is merely an adjustment at the level of liquidity and trading structure, rather than a reversal of industrial trends or fundamentals. The downside risk for the market is limited, and the medium-term uptrend remains unchanged.

Risk Warning and Disclaimer

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