Core Insights - The article emphasizes the long-term significance of share buybacks in China's capital market, advocating for a balanced approach between dividends and buybacks to align with the country's economic transformation and high-quality development needs [1][2]. Group 1: Current Market Overview - The proportion of cash dividend companies in China's A-share market from 2017 to 2024 remains above 65%, which is higher than the U.S. (40%-50%) but lower than Japan (approximately 80%) [1]. - The share buyback companies in China are comparable to those in the U.S. and Japan, but the buyback amount as a percentage of market value is relatively low, with less than 5% from 2017 to 2024, and only 0.18% projected for 2024 [1][2]. - In contrast, the U.S. saw buyback amounts exceed 2% of market value since 2022, while Japan's figures are generally above 1% [1]. Group 2: Regulatory Evolution - China's support for share buybacks has evolved from strict restrictions before 2005 to gradual relaxation and systematic improvements, with significant policy changes occurring in 2013 and 2018 [2]. - The 2018 policy changes introduced new buyback scenarios and broadened funding sources, leading to a historical high in buyback amounts [2]. Group 3: Corporate Preferences and Influences - Chinese companies show a preference for dividends over buybacks, influenced by tax policies and governance structures. Dividend income can be tax-exempt after one year of holding, while capital gains from stock sales are not taxed, making dividends more attractive [2]. - Institutional investors, such as state-owned shareholders and insurance funds, have a strong demand for stable cash flows, further driving the preference for dividends [2]. Group 4: Recommendations for Improvement - The article suggests three regulatory recommendations to enhance the buyback mechanism: 1. Strengthening buyback compliance supervision and establishing a fulfillment guarantee mechanism [2]. 2. Optimizing tax incentive policies related to buybacks to balance the tax treatment between buybacks and dividends [2]. 3. Incorporating buybacks into the market value management assessment and information disclosure framework for large-cap companies [2].