From Raising Capital to Rewarding Investors: How China Is Reshaping Its Markets to Foster a Virtuous Cycle Across Capital, Industry, and Consumption

Shanxi Securities' head of research weighs in on China's market-overhaul strategy

TAIYUAN, China, Sept. 10, 2026 /PRNewswire/ -- On July 30, 2026, China's Politburo met to chart the course for the next phase of economic policy. The central takeaway: Beijing is pressing ahead with efforts to rebalance the economy, accelerate the shift from traditional to emerging growth drivers, build a modern industrial base, and develop emerging industries into major new sources of growth. The meeting also called for broader capital-market reforms aimed at better balancing the needs of companies raising capital with those of investors. According to Deng Zhouyu, head of research at the major Chinese financial services firm Shanxi Securities, this marks a defining moment: China's economy is in the midst of a systemic shift. Traditional growth engines are steadily receding, while new ones are gathering momentum, giving capital markets a stronger industrial base from which to channel funding into the real economy. At the same time, China's capital markets are evolving from being primarily a vehicle for corporate financing into a market that serves investors as well as companies raising capital. These changes are intended to support the industries that will drive the next phase of growth and accelerate the broader shift in China's growth model.

China's registration-based IPO reforms are continuing to reshape how companies raise capital, with listing requirements, market rules, and capital allocation increasingly geared toward technological innovation. As of August 31, 2026, the STAR Market and ChiNext together hosted 2,019 listed companies, with a combined market capitalization of RMB36.48 trillion.

The sector mix is heavily weighted toward "hard tech," including advanced manufacturing, digital electronics, tech services, and biopharmaceuticals. But the STAR Market, in particular, is now going further. It is opening its doors to leading developers of large AI models, while prioritizing companies in next-generation fields such as quantum technology, biomanufacturing, and embodied intelligence. At the same time, regulators are modestly broadening the aperture to direct more funding toward emerging consumer sectors and modern services.

At the heart of China's comprehensive capital-market reform is a fundamental rebalancing: moving away from a system long criticized for prioritizing corporate fundraising over investor returns, toward one that puts financing and investment on a more equal footing. That shift is now showing measurable results. Listed companies have been improving corporate governance and increasing R&D spending, which in turn has lifted overall profitability, dividend payouts, and governance standards. These improvements are building a stronger fundamental case for long-term investors. In 2024 and 2025—the first two years under Beijing's new Nine-Point Guideline—dividends and buybacks across the A-share market reached a record RMB5.23 trillion. And the trend has continued into 2026. As of August 31, 2026, 872 listed firms had announced cash dividend plans for the first quarter or first half of the year, with companies in strategic emerging industries accounting for roughly half of that group. Aggregate cash dividends for the period stood at RMB740.3 billion, reinforcing a clear shift toward rewarding shareholders.

Policy measures are now working in concert to create a more supportive environment for long-term capital in China's stock market. These include extended performance-evaluation windows, a pilot program allowing insurance funds to allocate more to equities, and a dedicated implementation plan for channeling medium- and long-term funds into the market—all designed to encourage patient, long-term investment. The numbers bear out the trend. By the end of 2025, medium- and long-term investors held a combined RMB23 trillion in tradable A-shares, up 36% from the start of the year. Meanwhile, equity fund assets under management grew from RMB8.4 trillion to roughly RMB11 trillion over the same period.

A notable institutional shift is now taking shape in China's equity markets: a standing stabilization framework that reduces the occurrence of ad hoc policy interventions during periods of volatility. Today, policymakers have built a more mature, multi-agency risk-management system designed to bolster market resilience. At its core, this new architecture combines several layers: the securities regulator and the central bank have jointly established structural monetary-policy tools; Central Huijin, a state-owned investment vehicle, acts as a quasi-market stabilizer through market-based operations; and a suite of standing mechanisms—including strategic reserve buffers, early-warning systems, and countercyclical adjustments—provides a coordinated safety net. The result is a more systematic approach to managing market risk.

According to Deng Zhouyu, as reforms aimed at making the market work better for investors deepen and market stability improves, a powerful channel is opening through which stock-market gains can translate into household wealth and, ultimately, consumer spending. That, in turn, could shift household spending toward new consumer categories, premium products and services, giving a much-needed tailwind to domestic consumption—an increasingly important source of growth for China's economy.

The envisioned transmission chain is a virtuous cycle: capital fuels industry; industry drives consumption; and consumption, in turn, reinvigorates the market—creating a positive feedback loop.

SOURCE SHANXI SECURITIES CO., LTD.