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China to create new monetary policy tools to support stock market: official
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Category：Legislative Updates
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Subject：People and society ; Macro-economy ; Fiscal policy and taxation ; Finance
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Source：Xinhua
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Publish Date：09-25-2024
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BEIJING, Sept. 24 -- The Chinese central bank will create new monetary policy tools to support the stable development of the stock market, the central bank governor said Tuesday.
The central bank will establish a swap program for securities, funds and insurance companies to obtain liquidity from the central bank through asset collateralization, Pan Gongsheng, governor of the People's Bank of China, told a press conference.
The program will significantly enhance the companies' ability to acquire funds and increase their stock holdings, Pan said.
According to Pan, eligible companies could use their assets including bonds, stock ETFs and holdings in constituents of the CSI 300 Index as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills. Funds obtained through this tool can only be used for investment in the stock market.
The initial scale of the swap program will be set at 500 billion yuan (about 70 billion U.S. dollars), with possible expansions in the future, Pan said.
The central bank will also create a special re-lending facility to guide banks to provide loans to listed companies and their major shareholders for buybacks and increasing shareholdings, Pan said.
The initial re-lending will be 300 billion yuan at an interest rate of 1.75 percent for commercial banks, which could lend to their clients at an interest rate of 2.25 percent. Depending on the market conditions, the operation may be repeated in the future, Pan said.
The facility can be applied to various types of companies regardless of their ownership, Pan added.
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