Unpacking China’s vision for its capital markets
Key takeaways
China has a long-term vision for its capital markets that prioritizes stability, investor returns, and support for innovation over rapid expansion.
- A 2024 State Council circular set three targets: establishing the overall market framework within five years, building a highly competitive and inclusive market by 2035, and achieving world-class status by mid-century.
- The approach shifts from "grow fast" to "grow well," channeling funds into cutting-edge sectors and helping households build wealth rather than treating markets as just a fundraising channel.
- Markets are becoming both more inclusive, by accommodating pre-revenue companies and new listing tracks, and more demanding, through stricter delisting rules, stronger fraud enforcement, and tighter disclosure requirements.
China has set out an ambitious long-term vision for its capital markets — one that prioritizes stability over rapid expansion, while emphasizing investor returns and support for innovation. What will this mean for investors inside and outside the country?
China has a long-term plan for its capital markets — and it is considerably more ambitious than most outside observers appreciate.
“The vision is to build a safe, regulated, transparent, open, vibrant and resilient high-quality market that serves Chinese modernization and the goal of becoming a financial powerhouse,” said Zhipeng Yan, CFA, Professor at Shanghai Advanced Institute of Finance (SAIF).
It’s a long-term endeavor with clear milestones. A circular released by the State Council in 2024 laid out three targets: establishing the overall framework within five years, building a highly competitive and inclusive market by 2035, and achieving world-class status by mid-century.
What does the capital markets strategy mean in practice?
China’s approach contrasts sharply with the “shareholder capitalism” model in the US, said James Choa, CFA, Founder and CEO of Elfoso Holdings.
In China, the market is “essentially a tool to advance the state’s industrial goals and long-term priorities,” he explained. “It allows competition and entrepreneurship — but within political boundaries.”
Professor Yunda Li, CFA, Associate Professor and Master Supervisor in the Department of Financial Engineering at the School of Economics, Hefei University of Technology, characterized the government’s vision as a shift from “grow fast” to “grow well.”
“That means channeling funds into cutting‑edge sectors, helping households grow their wealth,” said Li. “So it’s really about making the market a strategic tool for economic transformation, not just a secondary fundraising channel.”
Professor Jiajing Sun, CFA, a finance academic, said the roadmap for China’s capital markets “is intended to make growth and investment returns more durable.”
The objective, she said, is not to target a particular index level or valuation multiple, but to build a market in which company fundamentals, governance and cash generation matter more consistently than short-term themes.
Songjie Wang, CFA, Partner and Portfolio Manager at Shenzhen Dragon Pacific Capital, explained that stability is the strategy rather than a consolation prize.
“The 2015 market crash and the 2023–24 valuation collapse taught Beijing two lessons,” he said. “These were that a boom-bust market destroys household confidence and consumption — the opposite of what the economy needs as property wealth fades — and that an unstable market cannot perform its structural mission of pricing and funding long-duration innovation.”
How will the capital markets support innovation in China?
One of the key elements of China’s vision is to make its capital markets a more effective financing system for innovative companies. It will build on the existing tiered market structure, said Yan, consisting of the STAR Market focused on hard-technology companies, ChiNext serving growth-stage innovative firms, and the Beijing Stock Exchange as the main venue for innovative small and medium-sized enterprises.
Together, these markets accommodate different listing criteria, placing greater weight on R&D expenditure, revenue growth, market value and technological capability, rather than requiring current profitability.
In June 2026, Qing Wu, Chairman of the China Securities Regulatory Commission, announced a further expansion of the fifth listing standard to include companies in AI large-model development, quantum technology, biomanufacturing and embodied intelligence.
Li highlighted the breadth of the ecosystem being built to finance innovation.
“They’re also expanding the bond market for tech companies and encouraging venture capital to invest early and small, with clearer exit paths,” he said. “The whole idea is to create a full lifecycle support system – from startup to IPO – so that ‘hard-tech’ and strategic sectors get the funding they need without being blocked by old profitability rules.”
Underpinning these market-level changes is a broader policy framework to support the country's national economic and developmental goals by advancing five key areas in the financial sector: technology finance, green finance, inclusive finance, pension finance, and digital finance.
What role will institutional investors and long-term capital play?
A central pillar of China's vision is to make its capital markets significantly more institutional. China's stock markets have historically been dominated by retail investors (see Figure 2), contributing to the volatility and speculative nature that policymakers are now explicitly trying to change.
Yan described domestic institutions as the market’s “ballast stone” — a stabilizing base of long-term capital against which retail-driven volatility can be gradually moderated.
Regulatory mandates are reinforcing this shift, requiring state-owned insurers and public funds to increase their A-share allocations significantly over the coming years.
China is also trying to encourage a longer-term investment approach among institutional investors, said Li, by extending performance-evaluation horizons. State-owned insurers are now assessed over one, three and five years, while basic pension funds face assessment periods of more than three years. The aim is to reduce pressure to chase short-term returns.
International investors, meanwhile, are expected to play a complementary role. Yan identified three contributions: they bring global valuation frameworks and governance practices that can raise the quality of local pricing; they diversify the capital base and reduce the risks of excess domestic liquidity concentration; and their participation helps China deliver on its market-opening commitments.
How should investors read the reforms?
China’s capital markets are on track to become both more inclusive and more demanding. More inclusive in accommodating pre-revenue companies and new listing tracks; and more demanding through stricter delisting processes, stronger enforcement against fraud, and tighter disclosure requirements.
Li said that investors should look beyond the immediate market impact of policy changes and consider their longer-term effect on the market’s development.
He said that it would be a mistake to see policy moves as interference, rather than a way to build a healthier ecosystem.
“Some might think, ‘Oh, the government is meddling again,’ but actually they’re trying to reduce speculative noise and create a more predictable environment,” he added.
Sun cautioned against treating China as a single investment exposure. “As the market becomes more differentiated, dispersion among companies and sectors is likely to become at least as important as the overall market direction,” she said.
“Investors should treat the 15th Five-Year Plan and related policies as a map of structural direction, not a buy list,” she added. “A company may operate in a strategically important industry, but shareholder returns will still depend on its technology, management, governance and entry valuation.”
It’s also worth keeping in mind that the implications of China’s vision for its capital markets extend beyond the domestic market. Wang pointed out that it is also inextricably linked to the next phase of the country’s global expansion.
“China’s next generation of global companies are being forged by domestic hyper-competition while tariff barriers turn them into localizing multinationals,” he said.
“At the same time, Beijing is deliberately rebuilding its capital markets into the patient, innovation-financing, household-wealth infrastructure those companies — and the broader economy — require,” he added. “Investors who analyze both as a single system, rather than as separate stories, will have the edge.”
To learn more about China investment trends, explore these stories:
Where AI meets manufacturing: China’s next investment frontier
China’s role in supplying the clean energy transition
Investing in the next phase of China's global expansion
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