China deploys record $2 billion into tech ETF to halt selloff

China mobilized state-linked institutions to pour a record RMB 13.8 billion ($2 billion) into the ChinaAMC STAR 50 ETF on Monday, broadening its market rescue from blue chips to the technology sector after a selloff erased a fifth of the index's value.

"The scale and targeting of these inflows suggest policymakers are treating the tech rout as a systemic risk rather than a sector-specific correction," said Cynthia Ho, a Hong Kong-based analyst covering China macro and policy.

The STAR 50 Index surged 7% on Tuesday after initially falling more than 3%, while the CSI 300 Index gained 1.8%. Semiconductor stocks led the rebound, with the sector sub-index climbing 8.9%. The Huatai-PineBridge CSI 300 ETF, previously the preferred vehicle for state buying, attracted RMB 12.6 billion on Monday — trailing the STAR 50 ETF for the first time.

The intervention comes as the STAR 50 Index had slumped 21% from its June peak, with the selloff threatening to snowball into a broader confidence crisis just as the economy shows signs of slowing. The Politburo meeting expected in late July will likely signal further policy support, with Goldman Sachs drawing parallels to mid-2024 conditions that preceded stronger stimulus.

At least five of China's largest insurers pledged to boost equity investments. China Life Insurance Co. said its unit bought more than RMB 10 billion worth of stocks and funds and vowed to increase holdings in new growth sectors. The People's Insurance Company of China and Ping An Insurance Group made similar commitments.

State-backed asset managers also signaled support. Bosera Fund Management said it would invest RMB 50 million of proprietary funds into equity products it manages — purchases typically made during acute market stress. In a rare move, brokerage GF Securities raised its margin financing quota by RMB 90 billion, potentially giving investors greater access to liquidity as leverage was being unwound. Chinese traders cut leveraged positions at the fastest pace since the 2015-2016 market crash on Friday.

The securities regulator added its voice to the stabilization effort. China Securities Regulatory Commission Chairman Wu Qing met with investors on Monday, pledging to prevent risks, improve investor protection and enhance returns.

The last time China deployed state funds at this scale was during the 2015 market crash, when the national team bought an estimated RMB 1.5 trillion of equities over several months. The current intervention differs in its precision targeting — directing capital specifically to the STAR 50 rather than broad index funds — reflecting Beijing's strategic priority on semiconductor self-sufficiency.

The rebound extended beyond A-shares. In Hong Kong, the Hang Seng Tech Index rose 1.8%, though the broader Hang Seng Index traded largely unchanged. Asian chip stocks also recovered, with Taiwan's Taiex jumping 3.9% — its best day since May — as TSMC gained 3.2% and Foxconn added 5.1%. South Korea's Kospi rose 4.5%, led by Samsung Electronics and SK Hynix.

Investors now await the Politburo meeting, expected in the final week of July, for signals on additional fiscal stimulus. Goldman Sachs expects the gathering to signal a more accommodative policy stance, with authorities likely to accelerate deployment of existing fiscal resources. The key question for markets is whether the state-led buying can sustain momentum beyond the initial relief rally, particularly as U.S. tech earnings from Intel and Alphabet this week will test whether AI monetization is materializing.

This article is for informational purposes only and does not constitute investment advice.