China to Expand Stock Support Tools to Stabilize Market

China will encourage financial institutions to make fuller use of two stock support tools and optimize their terms, as authorities step up efforts to bolster market stability and confidence.

The People’s Bank of China said it will conduct operations under its swap facility for securities firms, funds and insurers when appropriate. It will also increase the number of participating institutions and moderately lower swap fees, the central bank said in a statement on Monday following a meeting with financial regulators and institutions.

Separately, it will cut the rate on its relending facility for share buybacks and stake increases to 1% from 1.25%, make the program permanent and encourage banks to increase lending, the PBOC said.

The two tools were introduced in October 2024 as Beijing sought to shore up the stock market. The relending facility provides low-cost central bank funding to banks for loans financing share buybacks and stake increases by listed companies and major shareholders.

The China Securities Regulatory Commission said in a separate statement that a third round of swap operations will begin in coming days, with 31 securities and fund firms approved to participate and applying for more than 100 billion yuan of quotas. The regulator also plans to broaden the coverage of the relending program, including by encouraging more major index constituents and leading technology companies to participate.

The CSRC also plans to ease share buyback rules, including allowing companies to repurchase shares when their stock falls below the IPO price and requiring companies with excess fundraising proceeds to conduct buybacks when market support conditions are triggered. It will also study changes to margin-financing requirements to moderately increase financing capacity and improve market liquidity.

Chinese shares have been mired in a slump since the summer amid a weak economy and doubts over AI earnings. The CSI 300 Index fell 8.5% in October, its worst monthly decline in more than a decade, and dropped for a record 12 straight weeks through Friday.

Read More: Chinese Stock Selloff Halts on Expectation of Support Measures

About 440 billion yuan ($66.2 billion) of loans supporting share buybacks and stake increases have been contracted, with more than 280 billion yuan disbursed, according to the central bank. The outstanding balance of the swap facility is 105 billion yuan.

The meeting was attended by 23 securities firms, funds and 26 banks. Representatives from China International Capital Corp., Guotai Haitong Securities Co., Citic Securities Co., Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and China Citic Bank Corp. were among those who spoke, the PBOC said.