China’s National Team Shift Signals $68 Billion Market Strategy Change

Investors in China’s stock market are responding to a significant shift in strategy from the government’s so-called national team, which traditionally provided a cushion during market downturns. Last week, record outflows from exchange-traded funds (ETFs) managed by Central Huijin Investment, a sovereign wealth fund, indicated that Beijing is not merely supporting the market but is actively curbing the rally. This marks a notable departure from previous approaches used to stabilize prices.

In a span of just six sessions up to March 2025, Central Huijin reportedly sold approximately $67.5 billion across 14 ETFs, according to Bloomberg Intelligence. The scale of these transactions suggests a proactive effort to address speculative excesses, particularly in the technology sector. “If enough people are watching what this player is doing, its actions could be enough to alter expectations,” said Chen Da, founder of Dante Research. This sentiment reflects a growing recognition among investors that the national team’s operations are changing, transitioning from one-way market support to a more complex strategy of two-way trading.

The recent outflows coincide with tightened regulations on margin financing, signaling official concerns over rapid gains in high-risk areas such as artificial intelligence and rocket technology, where profitability remains uncertain. The broader onshore benchmark, the CSI 300, has seen a modest increase of 1.8% in the past month, while the chip-focused Star 50 Index has surged by 16%.

Fund managers are recalibrating their strategies in light of these developments. “These days it’s probably smart to focus trading on the stocks that the team owns less of to avoid being in the line of fire,” noted Wu Wei, a fund manager at Beijing Win Integrity Investment Management Co. He added that his trading has slowed, as the current environment does not signal bullish momentum.

Analysts are now scrutinizing the remaining resources of Central Huijin. The fund began significantly investing in ETFs in 2023, accumulating around $180 billion in assets by the end of August 2025. One report from Bloomberg Intelligence suggested that following the record outflows from a fund linked to the Star 50 Index, only about 5% of Central Huijin’s original capacity remains for that particular product.

Market activity has shown signs of the national team’s influence. In recent trading sessions, intraday gains for specific indices were quickly dampened as trading volumes surged for ETFs tracking those indices. On one occasion, turnover for CSI 1000 ETFs increased significantly as the underlying gauge bounced back nearly 2% within an hour, before settling lower. This pattern has continued, underscoring the current market dynamics where interventions have not consistently driven indexes into negative territory.

Though the selling surprised some investors, many interpret it as a necessary step toward nurturing a sustainable bull market. Volatility on the CSI 300 index has decreased to its lowest level since May, while overall trading volumes have moderated from an earlier frenzy that approached 4 trillion yuan earlier this month.

“Instead of reading the state funds’ selling as a signal that the rally is over, we should consider this in the context of the structural, slow bull,” commented Yang Ruyi, a fund manager at Shanghai Prospect Investment Management Co.. He emphasized that it is logical for Central Huijin to diversify into other thematic ETFs.

According to Z-Ben Advisors Ltd., the capacity to absorb significant selloffs without triggering major volatility highlights a robust institutional demand for A-shares. “Selling right now will free up positions so that they can provide a boost at a future time of risk,” stated Zhu Zhenxin, head of Asymptote Investment Research in Beijing. He added that such interventions could prevent a repeat of the wild market conditions witnessed in 2015.

As market participants closely monitor the national team’s flows, there is speculation that once investors perceive the selling pressure has eased, they may reignite interest in technology stocks. Despite the ongoing selloffs, the CSI 1000 Index, which includes leading companies in the aerospace and chip sectors, remains at its highest level since 2017.

The involvement of Central Huijin in ETF trading raises questions regarding market dynamics and price distortions. For now, Niu Chunbao, a fund manager at Shanghai Wanji Asset Management Co., is focusing on blue-chip stocks affected by recent ETF selling. “I am pleased to see the team exit some of the ETFs as gains in some stocks were making the market restless and impulsive,” he remarked, adding that the dips resulting from these sales could make value stocks more appealing.

This evolving landscape in China’s stock market continues to capture the attention of investors and analysts alike, as the implications of these strategic shifts unfold.