China's National Team Sells $67.5 Billion in ETFs, Signals Strategic Market Shift
Central Huijin Investment sold $67.5 billion across 14 ETFs in six sessions, marking a strategic shift from market support to active intervention. The selling targets overheated technology sectors while the broader CSI 300 gained 1.8% and chip-heavy Star 50 jumped 16%. Strong institutional demand absorbed the outflows without major volatility, with market participants viewing the intervention as fostering sustainable bull market conditions rather than cooling broader sentiment.
*this image is generated using AI for illustrative purposes only.
China's financial markets witnessed a seismic shift as the country's sovereign wealth fund Central Huijin Investment executed record outflows from exchange-traded funds, signaling the end of unconditional market support. Bloomberg Intelligence estimates the national team sold $67.5 billion across 14 ETFs in just six sessions through Thursday, marking a fundamental departure from years of one-way market backstopping.
This dramatic pivot represents more than routine portfolio rebalancing. For years, investors took comfort in the national team's invisible safety net, quietly deploying vast resources to cushion selloffs and stabilize prices. The recent selling spree sends the clearest signal yet that Beijing is actively reining in market rallies rather than simply propping up prices—a sharp break from past rescue playbooks.
Strategic Intervention Targets Overheated Sectors
The ETF outflows coincide with regulatory efforts to tighten margin financing rules, reflecting official unease over rapid gains in speculative sectors. Technology stocks, particularly rockets and AI applications with unclear profitability profiles, have drawn particular scrutiny from authorities seeking to drain speculative excess.
| Market Performance: | Past Month | Sector Focus |
|---|---|---|
| CSI 300 Index: | +1.8% | Broader market |
| Star 50 Index: | +16% | Chip-heavy technology |
| CSI 1000 Index: | Highest since 2017 | Rocket and chip supply chain |
The scale of intervention has already altered investor behavior and market dynamics. "If enough people are watching what this player is doing, its actions could be enough to alter expectations," said Chen Da, founder of Dante Research. Fund managers are now adjusting strategies to avoid sectors with heavy national team exposure.
Market Absorption Shows Institutional Strength
Despite the massive selling pressure, Chinese markets have demonstrated remarkable resilience. Strong institutional demand has absorbed the outflows without triggering major volatility, with short-term volatility on the CSI 300 falling to its lowest level since May. Trading activity onshore has eased from the frenzied pace of nearly 4 trillion yuan earlier this month.
| National Team Position: | Amount | Status |
|---|---|---|
| Total ETF Assets (Aug 2025): | $180 billion | Peak holdings |
| Recent Sales: | $67.5 billion | Six-session outflow |
| Star 50 ETF Remaining: | ~5% | Estimated firepower left |
Investors and analysts are closely monitoring the national team's remaining ammunition. Central Huijin began aggressively investing in China's ETFs in 2023, amassing $180 billion in such assets by August 2025. Bloomberg Intelligence analysts estimate only 5% of Central Huijin's firepower remains for the Star 50 Index product after record outflows.
Two-Way Trading Creates New Market Dynamics
The shift from one-way support to active two-way trading is creating new market patterns that investors are learning to decode. In recent sessions, intraday gains in certain gauges were quashed as turnover surged in corresponding ETFs—now widely interpreted as national team selling signals.
On Wednesday, CSI 1000 ETF turnover climbed as the underlying gauge rebounded nearly 2% within an hour before slipping lower. Similar patterns repeated throughout the week, though strong risk appetite meant interventions didn't always push indexes into negative territory. The E-fund ChiNext ETF saw sizable outflows Thursday, but the gauge eventually recovered from intraday drops.
Strategic Repositioning for Sustainable Growth
Many market participants view the selling as constructive rather than bearish, interpreting it as fostering gradual bull market conditions. "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," said Yang Ruyi, fund manager at Shanghai Prospect Investment Management Co.
The intervention strategy aims to prevent excessive speculation while maintaining underlying market strength. "Selling right now will free up positions so that they can provide a boost at a future time of risk," said Zhu Zhenxin, head of Asymptote Investment Research in Beijing. "Such intervention will prevent a 'mad bull' like the one we saw in 2015."
For value-oriented investors, the national team's repositioning creates new opportunities. Fund managers are identifying blue-chip stocks swept up in ETF selling as potential value plays, viewing temporary dips as attractive entry points for quality companies caught in broad-based outflows.
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