China unveils details of US$42 billion relending scheme to sustain stock market

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Twenty-one banks to extend loans for stock buy-backs and stake hikes as the part of the 300 billion yuan scheme unveiled late last month

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The 300 billion yuan relending programme is one of the two new financial facilities worth a combined 800 billion yuan unveiled by PBOC governor Pan Gongsheng late last month as part of efforts to shore up China’s US$9.6 trillion onshore stock market. Photo: Reuters

Zhang Shidongin Shanghai

Published: 4:06pm, 18 Oct 2024Updated: 4:40pm, 18 Oct 2024

Listed Chinese companies and key shareholders can apply for loans from nearly two dozen banks to fund stock buy-backs and stake increases, as financial regulators unveiled rules for the 300 billion yuan (US$42.2 billion) relending programme as part of their funding tools to bolster equities.

Stocks got a lift from the news, with the CSI 300 Index rising 3.6 per cent for the biggest gain in almost two weeks on Friday.

China Development Bank, Postal Savings Bank of China and policy banks, such as the Export-Import Bank of China and Agricultural Development Bank of China, are among the 21 lenders that will lend to qualified borrowers at a maximum annual interest rate of 2.25 per cent effective immediately, according to a joint statement issued by the People’s Bank of China (PBOC), China Securities Regulatory Commission (CSRC) and the National Financial Regulatory Administration on Friday. Applicants have to open special securities accounts for stock buying, the statement added.

The relending programme is one of the two new financial facilities worth a combined 800 billion yuan unveiled by PBOC governor Pan Gongsheng late last month to shore up China’s US$9.6 trillion onshore stock market. The central bank announced the details of a 500 billion yuan swap facility last week, which aims to help brokerages, fund firms and insurers swap their stock holdings for other liquid assets with the PBOC.

PBOC governor Pan Gongsheng unveiled the massive stimulus programme on September 24. Photo: Reuters

“If implemented effectively, these new policy tools could bring incremental funds into the market and enhance shareholder returns, thereby driving valuation re-rating,” BNP Paribas said in a report this week.