China's Market Stabilizers Turn Sellers in Major Policy Shift
For years, China's stock market investors relied on an invisible safety net known as the "national team"—state-backed entities that would quietly deploy massive resources to cushion selloffs and stabilize prices during turbulent times. This longstanding approach has undergone a dramatic reversal in recent weeks, marking one of the most significant shifts in Beijing's market intervention strategy in over a decade.
Record ETF Outflows Signal Strategic Reorientation
The clearest evidence of this policy transformation emerged last week when exchange-traded funds held by Central Huijin Investment, China's sovereign wealth fund, experienced record outflows. This development sends an unmistakable message that Beijing is no longer simply propping up the market but is actively working to moderate the rally—a sharp departure from traditional rescue playbooks that prioritized unconditional support.
According to Bloomberg Intelligence estimates, Central Huijin sold approximately $67.5 billion across 14 different ETFs in just six trading sessions through Thursday. While many market participants interpret this selling as an effort to drain speculative excess from specific technology sectors rather than cooling the broader market, the national team's evolution from one-way support to two-way trading is already influencing investor behavior across China's financial landscape.
"If enough people are watching what this player is doing, its actions could be enough to alter expectations," observed Chen Da, founder of Dante Research, highlighting how state-backed trading activities can reshape market psychology.
Regulatory Coordination and Sector-Specific Targeting
The ETF outflows have coincided with regulatory efforts to tighten rules on margin financing, signaling official unease over rapid gains in sectors where profitability remains uncertain—particularly rocket technology and artificial intelligence applications. While the broader onshore benchmark CSI 300 has advanced a modest 1.8% over the past month, the chip-heavy Star 50 Index has surged by an impressive 16%, illustrating the concentrated nature of recent market enthusiasm.
"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," advised Wu Wei, a fund manager at Beijing Win Integrity Investment Management Co. "My trading has slowed a bit because it's not a bullish signal at the end of the day."
Assessing Remaining Firepower and Market Impact
Although the national team's precise trading activities won't be fully revealed until quarterly ETF reports are published, investors and analysts are actively estimating how much ammunition remains. Central Huijin began aggressively investing in China's ETFs in 2023, accumulating approximately $180 billion in such assets by the end of August 2025, according to Bloomberg Intelligence data.
"The scale of liquidation suggests a proactive effort to facilitate a price correction in overheated sectors," wrote BI analysts including Rebecca Sin. Following record outflows from a fund tracking the Star 50 Index, they estimate that only about 5% of Central Huijin's firepower remains available for that particular product.
Intraday Patterns and Market Resilience
In recent trading sessions, intraday gains in certain market gauges were quashed as turnover surged in ETFs tracking corresponding indexes—a pattern now widely interpreted as evidence of national team selling. On Wednesday, for instance, turnover for CSI 1000 ETFs began climbing as the underlying gauge rebounded nearly 2% within an hour of trading before slipping lower.
Such patterns have repeated throughout the week, though strong risk appetite has meant these interventions haven't consistently pushed indexes into negative territory. The E-fund ChiNext ETF experienced sizable outflows on Thursday, yet the gauge eventually recovered from its intraday decline, demonstrating underlying market resilience.
Long-Term Perspective and Structural Transformation
While the selling surprised some market participants, many view it as a necessary step toward fostering a more sustainable, gradual bull market. Short-term volatility on the CSI 300 has fallen to its lowest level since May, and onshore trading activity has moderated from the frenzied pace of nearly 4 trillion yuan witnessed 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," suggested Yang Ruyi, a fund manager at Shanghai Prospect Investment Management Co., who added that it makes strategic sense for Central Huijin to reposition into other thematic ETFs.
Institutional Demand and Future Market Stability
For consultancy Z-Ben Advisors Ltd., the market's ability to absorb massive selloffs without major volatility indicates strong institutional demand for A-shares. This underlying strength provides a foundation for more measured interventions.
"Selling right now will free up positions so that they can provide a boost at a future time of risk," explained Zhu Zhenxin, head of Asymptote Investment Research in Beijing. "Such intervention will prevent a 'mad bull' like the one we saw in 2015."
Market Dynamics and Future Implications
With national team flows under intense scrutiny, investors may reignite the technology rally once they determine that little selling capacity remains. Strong underlying demand for tech stocks makes complete suppression of market enthusiasm challenging. Despite clear signs of intervention, the CSI 1000 Index—which includes rocket stocks like Hunan Aerospace Huanyu Communication Technology Co. and companies throughout the chip supply chain—remains at its highest level since 2017.
This situation raises important questions about whether such substantial involvement in ETF trading might distort normal market dynamics over the longer term. For now, however, some fund managers are identifying opportunities within the shifting landscape.
"I am pleased to see the team exit some of the ETFs as gains in some stocks were making the market restless and impulsive," commented Niu Chunbao, fund manager at Shanghai Wanji Asset Management Co. "Dips caused by their selling may render some value stocks even more attractive to us."
The transformation of China's national team from perpetual buyer to strategic seller represents a maturation of market intervention policies, potentially creating a more balanced environment where state support serves as a moderating influence rather than an unconditional backstop.
