PBoC launches special lending facility for share buybacks

China’s central bank today (October 18) launched a special lending facility for banks to facilitate share buybacks.

In a statement, the People’s Bank of China (PBoC) said the facility, which it had announced in September, would provide 21 commercial banks with 300 billion yuan ($42.1 billion) of cheap loans to fund the repurchase of stocks by listed companies or by major shareholders therein.

The PBoC also provided updated details on its swap facility aimed at encouraging stock purchases by institutional investors. The programme was announced in September and opened for applications last week.

Under the programme, funds, insurers and brokers can exchange assets such as corporate bonds, exchange-traded funds and shares in blue-chip Chinese companies for highly liquid assets, such as government bonds and central bank bills.

The PBoC said today that 20 institutions had been approved to participate in the programme, which had received applications for more than 200 billion yuan ($28.2 billion).

In a separate statement, also published today, the PBoC and regulators said they had met with key financial institutions on October 16 and urged them to boost credit support and swiftly implement the two stock market stimulus programmes.

Governor’s speech

Speaking at the 2024 Beijing Financial Street Forum, the PBoC’s governor Pan Gongsheng said the central bank might cut the reserve requirement ratio by an additional 0.25 or 0.5 percentage points.

The PBoC cut the ratio by 0.5 percentage points in September as part of the stimulus measures aimed at reviving China’s sluggish economy. It said the move would free up around one trillion yuan ($142 billion) of liquidity in the banking system.

In today’s speech, Pan said insufficient demand, weak social expectations and low prices were the main problems affecting the economy.

“Given the current economic performance, we need to implement strong macro aggregate policies,” he said.

Pan added that China should strike the right balance between consumption and investment: “Macroeconomic policies should pivot from an overemphasis on investment to both consumption and investment, with more focus on consumption.”