YICAI｜SSE Updates the Three-Year Action Plan for Index Business to Vigorously Promote the High-Quality Development of Index-Based Investment

Translated from Yicai

Indexes serve as important resources in the financial market, affecting the allocation of market resources as well as the "finance" and decision-making confidence of the general public. They play a significant role in stabilizing investment and expectations. In 2024, SSE formulated the Three-Year Action Plan for Index Business (2024-2026) (hereinafter referred to as the Action Plan). Under the leadership of the China Securities Regulatory Commission, SSE's index business has made milestone progress again. At present, the total number of indexes in various series is nearly 8,000, and the scale of tracking products has reached 3.5 trillion yuan, achieving an annual increase of about 80% in 2024 and attracting more than 1 trillion yuan of funds into the A-share market through ETFs. Recently, to promote the development of index-based investment to a new level, SSE has completed a mid-term update of the Action Plan.

The revision of the Action Plan is a crucial measure for SSE to thoroughly study the guiding principles of the Third Plenary Session of the 20th CPC Central Committee, the Central Economic Work Conference, and the symposium on private enterprises. It is also a specific arrangement to thoroughly implement the Guidelines on Strengthening Supervision, Forestalling Risks, and Promoting High-Quality Development of the Capital Market and the Guiding Opinions on Accomplishing Well in the "Five Key Areas" of Finance, align with the Implementation Plan on Promoting Medium- and Long-Term Capital to the Capital Market and the Action Plan for Promoting High-Quality Development of Index-Based Investment in the Capital Market, fully practice the political and people-oriented nature of the capital market, and promote the entry of medium-to-long-term funds into the market.

The Action Plan focuses on high-quality development, capacity building, mechanism establishment, and ecosystem construction, providing a development roadmap for SSE's index business that keeps pace with the times and facilitating the creation of a new landscape in the development of index-based investment. The specific update content can be summarized into the following three aspects.

It is necessary to stand firm on the people's side, establish a "Chinese brand" index system, and do a good job in the "five key areas" of finance. This involves increasing the supply of high-quality broad-based indexes and indexes with low risks and stable returns, promoting indexes and products suitable for medium-to-long-term investment to ordinary people, and enhancing investors' sense of gain. There is a need to enrich the global index layout, enhance the international influence and competitiveness of the index system, and perform well in "going out" and "bringing in". Additionally, it is important to focus on technology finance, green finance, inclusive finance, pension finance, and digital finance to accelerate the index-first layout for supporting the development of new quality productive forces and deepening reforms on the investment side.

It is essential to optimize the index ecosystem, create conditions for medium-to-long-term funds to enter the market, and promote the development of an environment with "long-term funds for long-term investment". This includes enriching indexes and products suitable for medium-to-long-term capital investment such as social security and insurance and strengthening index services for the personalized needs of institutional investors. Efforts should be made to continue to do a good job in publicity, promotion, and investor education, strengthen individual investors' understanding of index-based investment, and promote the expansion of the index-based investment group for long-term wealth management. Meanwhile, it is also necessary to research and promote the incorporation of ETFs into the fund trading platform for transfer.

It is crucial to utilize scientific and technological means to enhance the quality and efficiency of index management and enhance the ability of indexes to serve national strategies. This requires exploring the combination of artificial intelligence to improve the digitization and intelligence level of index compilation to better and faster serve the national key strategies and market demand in key areas. In this sense, there is a need to coordinate risk forestalling and promote high-quality development, strengthen index-based sample adjustment and position adjustment as well as safe operation risk management capabilities, improve the internal stability of index-based investment, and ensure the sound and steady development of the industry.

Subsequently, SSE will continue to implement the Action Plan with greater efforts and more practical measures under the strong leadership of the China Securities Regulatory Commission and work with relevant parties to promote the high-quality development of index-based investment and establish a market ecosystem with more coordinated investment and financing.

The above information is provided for reference purposes only and does not constitute investment advice.