China’s onshore equity market is flashing signs of a more durable rebound as state-backed institutional money, with strong policy support, makes its presence felt. The national pension fund, in particular, increased the number of A-share companies it holds by an astonishing 56.5% in the first half of 2025.

The recent A-share rally is partly attributed to the stimulus measures implemented from late last year. “The pivot in macro policy since September 2024 stands out,” says Peiqian Liu, Asia economist at Fidelity International. “The People’s Bank of China ( PBoC ) has prioritized measures to bolster equity markets, including new structural monetary policy tools, such as swap facility and relending, to encourage long-term investment into the stock markets. Notably, institutional investors have led the charge in A-share inflows during the first half of the year, which is a marked contrast to the retail-driven rally of 2015.”

Collectively known as the “national team”, China Securities Finance Corporation, Central Huijin Investment, CSF Asset Management, the State Administration of Foreign Exchange’s investment platforms, and several CSF-managed funds now sit among the top-10 circulating shareholders of 945 listed companies in the country, exchange filings show.

The figure is 13.3% higher than the 834 companies the team invested in a year earlier, a rapid expansion that analysts interpret as a bet on a medium-term recovery in the market. “While the economy is still in the process of stabilizing, key developments have fostered renewed confidence. The ‘DeepSeek moment’ in early 2025, the emergence of new consumption patterns, combined with robust demand for Chinese exports and AI-related investments, have restored investors’ confidence in China’s growth prospects,” says Liu. 

Even more telling is the behaviour of the National Council for Social Security Fund ( NSSF ), China’s main public pension fund. In the first six months of 2025, the fund increased the number of A-share companies in its portfolio to 582 from 372, a 56.5% jump compared to the end of 2024. During the period, the market value of those positions increased 35.8% to 563.7 billion yuan ( US$79.3 billion ) from 415.1 billion yuan, according to public data compiled by Choice Data.

The NSSF is also expected to maintain its strong momentum for a long while after the Ministry of Finance and the State Taxation Administration recently issued tax-related measures favourable to the fund. Such moves are likely to bolster the net returns of the pension fund’s investments and encourage it to diversify from traditional low-risk assets to equities, real estate investment trusts ( Reits ), and overseas allocations without compromising its fiduciary duty to preserve capital.

In turn, the fund is likely to serve as a stabilizing force for the capital market, steering the ecosystem away from short-term speculation and towards long-term value.

Banks still dominate, tech takes a back seat

The banking sector remains the NSSF’s core investment focus. At the end of June 2025, it held 322.4 billion yuan of bank stocks, representing 57.2% of its total equity book, according to Choice Data.

Of the other key sectors, transportation, basic chemicals, machinery, electronics, non-ferrous metals, pharmaceuticals, and power equipment secured investments from the fund of more than 10 billion yuan each. In the second quarter, the fund added exposure to transportation, chemicals, and electronics, while trimming its holdings in household appliances, agriculture, social services, and environmental stocks, Choice Data notes.

However, NSSF did not appear to have bought during the blistering rally of semiconductor and software names that have captivated retail investors this year. At the end of the first half of this year, the NSSF held only 48 technology stocks.

The fund also took profits in defence industrials, the best-performing sector during the second quarter with a 19.8% gain. It cut its weighting in the sector by almost 20%.

Looking ahead, Liu believes a revival in the initial public offering market could reinforce a positive financing loop and enhance the transmission mechanism for the financial markets to support the real economy. While investor enthusiasm has not matched that of a decade ago, the retail momentum is building, with margin financing rising and household deposits potentially declining as more funds enter equities.

But challenges remain. “H2 of this year presents ongoing challenges, particularly the scaling back of subsidies from the durable goods trade-in programme, payback from tariff frontloading as well as property sector weakness,” says Liu.