Founder Securities Chief Economist Yan Xiang: China's Capital Market Is Better Aligned and More Effective in Backing the New Growth Drivers

The Political Bureau of the CPC Central Committee convened a meeting on July 30 to assess the current economic landscape and set priorities for the second half of the year. On capital markets, the meeting called for deepening comprehensive reform of the investment and financing framework and strengthening market resilience and confidence. Founder Securities sees these priorities as significant for three reasons. An efficient and robust capital market underpins technological innovation and industrial transformation. The capital market is a major source of financing for the real economy, and it is a central platform for pricing risk and directing resources toward innovative sectors. Reforms that make the market's institutional framework more inclusive—enabling quality companies, particularly hard-tech firms, to tap capital markets and support the development of "new quality productive forces"—China's term for productivity driven by technological innovation and industrial transformation—are essential to achieving high-quality economic development and greater self-reliance in critical technologies.

Beyond that, a capital market in which the investment and financing functions develop in tandem can increase household investment income and help boost domestic demand. As a core link between the real economy and household wealth, a balanced capital market allows households to share more fully in corporate growth and benefit from the resulting wealth effect. Steady income gains translate into stronger consumer spending power and confidence, which in turn supports domestic demand. Just as importantly, a more resilient and credible capital market helps cushion external shocks and reinforce domestic financial security. With geopolitical conflicts persisting around the world and volatility in overseas markets intensifying, capital market stability has become a vital component of national financial security. Building market resilience and confidence means using the certainty of domestic development to offset the uncertainty of the external environment, thereby limiting the spillover from external shocks.

The past two years have already delivered substantial progress in China's capital market reform, with the market becoming significantly better equipped to serve new quality productive forces. The financing structure has kept improving. The market's institutional framework has become considerably more inclusive, significantly expanding financing channels for hard-tech companies. Since 2024, IPOs on the STAR Market, ChiNext, and the Beijing Stock Exchange have accounted for more than 70% of all A-share listings and more than 60% of total IPO proceeds. Meaningful headway has been made in bringing longer-term capital into the market. As the institutional framework supporting long-term capital participation has steadily improved, both the allocation of such capital to the market and its investment efficiency have continued to climb. Over the past two-plus years, the market value of A-shares held by medium- and long-term investors, including the national social security fund, insurers, and annuity programs, has increased by 85%, with net purchases of A-shares totaling approximately 1.3 trillion yuan (about US$193 billion). The quality of listed companies has kept improving, as has their focus on shareholder returns. In recent years, A-share listed companies have become significantly more innovative and better governed. Their overall profitability and willingness to reward shareholders have also risen, with cash dividends and share buybacks totaling 2.68 trillion yuan (about US$398 billion) in 2025. The market's internal stability has continued to improve. The two innovative structural monetary policy tools launched jointly by the China Securities Regulatory Commission and the People's Bank of China, along with Central Huijin's quasi-market-stabilization role, have played an important role in maintaining orde.