It rose to prominence when China’s stock market imploded in 2015, spending billions of dollars on equities as the authorities scrambled to stem the losses. Media and market watchers regularly refer to it, but it’s rarely mentioned by Chinese officialdom. There were even questions in 2018 about the desire to keep it going. But worry not, Chinese stockholders, the “national team” is here to (try to) save the day.

1. What is the national team?

It’s a nickname for the collection of state-related bodies that Chinese authorities lean on to buy stocks during times of turbulence. State-owned corporations have been purchasing shares since long before the 2015 crash. But the precipitous fall that year -- the Shanghai Composite Index dropped more than 40% from its peak in the space of 2 1/2 months -- stoked fears about the stability of the financial system itself. That prompted a government-directed splurge on mainland shares, or A shares, as well as the injection of liquidity to some asset management companies.

2. Who are the key players?

Goldman Sachs Group Inc. defines the national team as government-related entities formed during the 2015 turmoil as well as “those that already existed before the market crash but were actively engaged in the A-share market during volatile times.” Although opinions differ, the following are often cited as key team members:

• China Securities Finance Corp. -- founded in 2011 to provide funding to the margin-trading businesses of Chinese brokerages.

• Central Huijin Investment Ltd. -- part of China’s sovereign wealth fund and established in 2003 to invest in state-owned financial enterprises. During the 2015 rout, a unit, Central Huijin Asset Management, was created to buy equities.

• The State Administration of Foreign Exchange, the foreign exchange market regulator.

• The government’s National Social Security Fund.

• Some state-backed brokerages.

3. Why the concern about the national team’s future?

During the 2015 meltdown, five mutual funds were formed to purchase stocks with about 200 billion yuan ($31 billion) from China Securities Finance. Those funds, however, were reported to have been liquidated in 2018, leaving traders wondering about the status of the national team at a time when the stock market was in freefall. It didn’t help that an article by a state think-tank had called for the exit of the national team. But in a rare acknowledgment of its existence, China’s securities regulator said that the market had misinterpreted news about the funds selling their holdings, assuring investors that “relevant institutions” had actually increased their positions. Analysts speculated that the government had redistributed money from the funds to other parts of the market.

4. How much market presence does the national team have?

Goldman Sachs estimates the national team held around 3.3 trillion yuan ($500 billion) worth of China A shares as of the third quarter of 2020. While that’s significant, the national team was much less visible in the market in 2018, even as the Shanghai Composite fell about 30% from its peak. But state funds were said to have stepped in again in May 2019 as shares dropped after then-U.S. President Donald Trump threatened China with steeper tariffs. And on March 9, they were said to have intervened to alleviate a stock market rout that coincided with the biggest political meeting of the year in Beijing.

5. How effective is the national team?

Market participants say the mere knowledge of a big buyer provides a confidence boost when nerves are jittery. That’s especially important in China, a rare market where retail investors dominate trading. The national team helped equities to find a bottom in early 2016, but more recently, long-suffering investors have been disappointed. The Shanghai Composite was one of the world’s worst-performing benchmark stock indexes in 2018, falling 25%, and the amount of money traded each day on China’s exchanges has never recovered to pre-2015 crash levels.

6. Do other countries prop up their stock markets?

Yes. Japan’s central bank spent 2.4 trillion yen ($22 billion) on bank stocks to stabilize the financial system from 2002-2004 and 2009-2010, according to the Asian Development Bank Institute. More recently, it purchased exchange-traded funds as part of its stimulus program. In 1998, Hong Kong’s government bought billions of dollars’ worth of equities to stem a market rout. Taiwan set up a fund to support stocks in 2000 and South Korea made a similar move in 2018. What’s different with China is the sheer scale: It was reported in 2015 that, to avert a meltdown, China Securities Finance had access to as much as 3 trillion yuan of borrowed funds from sources including the central bank and commercial lenders.

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