A convergence of supportive policies, investor optimism and favorable allocation plans have set the stage for a new chapter of growth and resilience in China's dynamic capital market.

The nation's share market potential has emerged as a potent engine driving economic prosperity, as the country navigates several challenges and seizes new opportunities.

China's A-share market recently saw a surge of vitality after the government adopted a fresh policy tone in July to support economic growth.

Additional policy support will be rolled out to facilitate the further development of the capital market and boost investor confidence, the Political Bureau of the Communist Party of China Central Committee said in a meeting in July, setting the tone for the country's economic development in the second half.

Shareholders are keenly watching for more concrete moves that will stimulate the stock market.

There has been much talk of policies that could invigorate short-term trades, including a reduction in transaction fees and loosening of T+0 (same-day settlement) trading constraints, though transaction fees in the A-share market remain reasonable compared to international counterparts, engendering a substantially higher turnover rate within the A-share market compared to its Hong Kong equivalent.

The development of a vibrant capital market, as articulated by the top leadership, entails much more than merely increasing short-term trading volume. Instead, it requires a bright future where the capital market can evolve into a pivotal conduit for residents to sustain capital gains over the long term.

Within this context, the strategic import of fostering enduring market yields holds a greater role than any transient dynamism through brisk market transactions.

Regrettably, there has been among Chinese shareholders a deep-rooted dogma, which views the A-share market as one fraught with financial risks, or a zero-sum game with no true winner.

Constrained returns, primarily stemming from systemic infirmities, have frustrated many investors in the A-share market over the past few decades. But in today's landscape, a paradigm shift aimed at propelling the capital market as a catalyst of China's economic development and technological innovation, is imperative.

To facilitate this evolution, a judicious and robust overhaul of institutional structures is required, as well as concrete actions that can help establish unwavering credibility.

From a rigorous crackdown on stock-market fraud to the establishment of a registration-based initial public offering mechanism, China's A-share market has made significant strides in its reform.

Whether this would work well remains to be seen, especially in a situation where the Chinese economy is faced with harsh external challenges, such as curbs by the United States on its high-tech industries and investments.

Against this backdrop, the government's resolute action in raising market returns will be key to consolidating confidence in the stock markets and boosting the economy.

A large number of blue-chip stocks, backed by State-owned entities, are listed on the A-share market. The Chinese government is, therefore, both a regulator and a participant in the stock market.

State-owned enterprises can do much during the transition stage of China's capital market by collaborating with the authorities in increasing market yields.

For instance, large blue-chip SOEs can facilitate this process with dividend incentives for the next five to 10 years that have higher allocation ratios toward its shareholders, where the State-Owned Assets Supervision and Administration Commission of the State Council also plays a big role in regulation and supervision.

Such collaborative efforts between large SOEs and regulatory institutions can help bolster the capital market's overall yields and unlock the A-share market's potential as a powerful engine of economic growth. In addition, higher dividend payout ratios will lead to abundant advantages at different levels.

First, it benefits the valuation of blue-chip SOEs themselves.

With higher dividend payout ratios come higher dividend yields, which entice risk-averse investors such as large insurance funds to increase their allocations and eventually bolster the valuations of such enterprises.

Given the SOEs' strategic importance, the valuation of the entire market would be recalibrated and lead to a sustainable valuation framework with Chinese characteristics that is not restricted to speculative short-term trading alone.

Second, because these SOEs boast State-owned investors as major shareholders, a firm commitment to higher dividend distribution would greatly improve national fiscal revenue, which is especially important in safeguarding public expenditure and contributing to the development of China's high-tech industry amid the current economic downturn.

Third, higher dividend payout ratios help generate more income for individual investors, thereby spurring consumption and facilitating economic recovery in the short run.

Last, as blue-chip SOEs are often emblematic of traditional and asset-intensive industries, their unrestrained expansion merits vigilance to ensure efficient economic transformation and upgrade.

Accumulation of excessive retained earnings could cause passive growth, dampening the efficiency of their capital utilization.

In this regard, heightened dividend payouts will compel these entities to optimize their capital utilization efficiency.

Moreover, it will also help State-owned asset regulators to undertake top-down adjustments for national assets during the process of economic transformation and upgrade.