China Boosts Use of Stock Support Tools to Stabilize Market

China Expands Stock Support Tools

China's central bank will push financial institutions to use two existing stock market support instruments more actively and will adjust their terms, according to a statement issued after a meeting with regulators and market participants. The People's Bank of China said it will run operations under its swap facility for securities firms, funds and insurers at suitable times, widen the list of participating institutions and modestly reduce swap fees. Separately, the PBOC will lower the rate on its relending facility for share buybacks and stake increases to 1% from 1.25%, make the programme permanent and urge banks to lend more.

Both tools date to October 2024. The relending facility gives banks low-cost central bank funding for loans that finance buybacks and stake purchases by listed companies and large shareholders. The China Securities Regulatory Commission said a third round of swap operations will start in the coming days, with 31 securities and fund firms approved and applying for quotas exceeding 100 billion yuan. The CSRC also plans to widen the relending programme's reach, including by drawing in more major index constituents and leading technology firms.

Why It Matters For Business

For listed companies and their advisers, the measures signal continued official backing for buybacks and promoter-level stake purchases, which affect capital structure, earnings per share and disclosure obligations. Easier buyback conditions could change how boards time repurchases, particularly where shares trade below the issue price. The CSRC intends to ease buyback rules so companies may repurchase when their stock falls under the IPO price, and to require firms holding excess fundraising proceeds to buy back shares when market support conditions are triggered. Entities weighing such moves would need to track Indian and Chinese regulatory touchpoints where cross-border listings, funding or subsidiary structures are involved.

What To Wat…