China expands financial tools to support falling stock market

China is pushing financial institutions to use two key stock support tools and improve their terms to steady the local market and build investor confidence. The People's Bank of China stated on Monday that it will run swap facility operations for funds, insurers, and securities firms when needed, while also adding more participating groups and lowering swap fees.

Loan Changes And New Rules

The central bank will cut the rate on its relending facility for share buybacks and stake increases from 1.25% down to 1%, make the program permanent, and push banks to lend more. The China Securities Regulatory Commission announced that a third round of swap operations will start soon, with 31 fund and security firms approved to take part and asking for over 100 billion yuan in quotas. The CSRC will also loosen share buyback rules, letting firms buy back shares if stock drops below the IPO price and requiring buybacks for companies holding excess funds.

Market Background And Support Data

These steps follow efforts that started in October 2024 to lift the stock market. Central bank data shows that about 440 billion yuan in loans for buybacks and stake increases have been contracted, with over 280 billion yuan paid out, and an outstanding swap facility balance of 105 billion yuan. A recent meeting included 23 funds and securities firms alongside 26 banks, with speakers from institutions like China International Capital Corp., Citic Securities Co., and Industrial & Commercial Bank of China Ltd.

Context

Chinese authorities frequently use monetary policy tools and direct market interventions to manage stock market swings and protect retail investor participation. These actions reflect broader government attempts to guide capital into equities during economic slowdowns, though shifting long-term household savings away from traditional bank deposits remains difficult.