China securities watchdog steps in to slow rally

Chinese officials are attempting to curb the nation’s booming stock market, favoring steady expansion over quick profits that can encourage reckless speculation. Early in 2026, trading activity hit previously unheard-of heights.

At a meeting hosted by the securities watchdog last week, officials clarified their stance. The market’s hot sectors were addressed after a strong start to the new year. This attracted additional attention.

Regulators prioritize market stability

During a work conference on January 15, the China Securities Regulatory Commission announced plans to crack down hard on excessive speculation and market manipulation. The regulator said it would work to avoid sharp market swings. Keeping the market stable would continue to be a top priority despite improving confidence among investors.

Stock markets in mainland China saw strong gains in early January. Trading volumes jumped, and margin financing balances repeatedly broke records. The CSI 300 Index is up 2.2 per cent this year. That builds on strong performance in 2025. The Shanghai Composite Index saw positive daily returns for 17 straight sessions before that streak ended on January 12. Both indexes have posted double-digit percentage gains for two years running.

Technology sectors related to artificial intelligence, commercial space exploration, and other emerging themes have driven much of the recent surge. This has boosted market momentum. But it also raised concerns about speculation fueled by borrowed money.

Last week, regulators reacted. On all mainland exchanges, they raised the margin funding requirements from 80% to 100%. On Monday, the modification went into effect. The action is perceived by many as a deliberate attempt to lower leverage and stop excessive speculation.

Following DeepSeek’s advances in artificial intelligence, the rally gained popularity. As a result, Chinese technology companies’ values increased. Compared to businesses on the Nasdaq 100, mainland tech companies currently trade at premiums of around 40%. Domestic markets become more appealing for public listings as a result. After a number of significant stock launches, the value change is anticipated to drive additional equity funding by AI businesses in 2026.

Commercial space stocks have increased significantly. BlueFocus Intelligent and other AI-related businesses saw a 20% increase. Following China’s application for frequency and space resources, including over 203,000 satellites across 14 constellations, the industry received extra assistance. Massive sums of financial cash were brought in by the hype surrounding AI and space projects. As a result, circumstances were formed that led to regulatory action.

New margin rules aim for controlled growth

The higher margin requirement reverses a policy from August 2023. Back then, the ratio was cut to 80 per cent to boost trading volumes and support the market. Since that reduction, financing levels and trading turnover have climbed consistently. This pushed regulators to make counter-cyclical adjustments.

Authorities want investors to fully fund stock purchases with their own money. They hope to moderate leverage levels and protect investors while promoting healthy long-term development of capital markets. The approach follows a familiar pattern. Chinese regulators allow market momentum to build. Then they step in early to address excesses rather than waiting to react after volatility increases.

Only recently launched margin contracts are subject to the new regulations. Contracts that were signed before the change won’t be impacted. This demonstrates Beijing’s desire to curb speculative trading without upsetting established positions. As market confidence continues to improve, the objective is to encourage a more restrained advance.

Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.