Chinese Banks Apply for More Than $30 Billion in Stock-Buyback Loans as PBOC Cuts Interest Rate
The PBOC cut the interest rate on its relending facility to 1% as Beijing seeks to stabilize the struggling equity market.
Chinese banks have submitted applications for more than 200 billion yuan ($30 billion) in loans under a central bank program designed to support stock repurchases and share purchases by major shareholders, as Beijing steps up efforts to stabilize its struggling equity market.
The People's Bank of China (PBOC) announced on Wednesday, November 4, that it had reduced the interest rate on its stock buyback and share-purchase relending facility by 0.25 percentage points to 1%, effective immediately. The move is intended to lower financing costs for eligible banks and accelerate lending to listed companies and their major shareholders.
According to the PBOC announcement published by Xinhua, the facility is available to 21 nationwide commercial banks and five systemically important city commercial banks. The central bank provides financing covering 100% of eligible loans, with a one-year maturity that can be extended according to banks' needs.
Banks can add a reasonable margin to the central bank's relending rate when determining the final terms and interest rates offered to borrowers.
The PBOC said the adjustment followed a meeting on November 2 involving the central bank, the National Financial Regulatory Administration and the China Securities Regulatory Commission. After that meeting, banks submitted applications for more than 200 billion yuan in relending quotas.
Reuters reported that the applications amounted to approximately $30 billion, indicating substantial initial demand for the financing mechanism. The central bank said it would continue to meet banks' funding requirements and encourage them to connect with listed companies and major shareholders seeking financing. Reuters reported the development on Wednesday.
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The program is part of a broader effort to encourage companies to repurchase their own shares and major shareholders to increase their holdings. Such transactions can signal management confidence in a company's prospects and may help support valuations during periods of market volatility.
China first established the relending facility in October 2024. The latest adjustment seeks to make the mechanism more attractive by reducing borrowing costs and ensuring that banks have sufficient access to central bank funding.
The policy comes after a difficult period for Chinese equities. The benchmark CSI 300 index fell 8.5% in October, its worst monthly performance in a decade. The decline reflected concerns about corporate earnings, economic growth and the valuation of technology companies.
However, the initial policy response has not fully restored investor confidence. A Reuters report published Wednesday said Chinese stocks had struggled to recover despite the latest measures, with the CSI 300 remaining substantially lower for the year. Some investors questioned whether encouraging companies and financial institutions to buy shares would be sufficient to address deeper concerns about economic fundamentals. Reuters coverage carried by Business Recorder highlighted the market's cautious reaction.
Business Recorder
The distinction between liquidity support and improved corporate performance remains important. Lower financing costs may encourage more buybacks, but a sustained market recovery also depends on earnings growth, business confidence and stronger demand.
For listed companies, the availability of cheaper financing could provide an additional option for managing their share prices and capital structures. For investors, the volume of actual loans issued and the scale of completed share repurchases will be more meaningful indicators than the initial applications alone.
The latest move demonstrates Beijing's willingness to use targeted monetary tools to support capital-market stability. Whether the policy can attract lasting investment will depend on its implementation and the broader outlook for China's economy.