As part of broader efforts to revitalise the country’s economy, The People’s Bank of China (PBC) has implemented a central bank lending facility for share buybacks. This offers an exception to regulations preventing bank lending from entering the stock market.
The initiative is part of a policy package that includes a swap scheme providing liquidity through asset collateralisation to encourage asset managers and insurers to buy stocks.
The programme was developed with the National Financial Regulatory Administration and the China Securities Regulatory Commission, following the decisions made at the third plenary session of the 20th CPC Central Committee to enhance capital market stability.
Now, 21 financial institutions with nationwide presences are now able to grant loans to public companies and major shareholders to support share buybacks and shareholding increases.
According to the Shanghai Stock Exchange, 11 companies listed on its main board have received RMB 5.176 billion in relending loans for this purpose.
These loans have an initial quota of RMB300 billion and an initial duration of one year, which can be extended. Loans can be borrowed at up to 2.25% interest, with an annual interest rate of 1.75%. Liquidity is granted on a quarterly basis, with relending applications open within the first month of the following quarter.
At the Annual Conference of Financial Street Forum, PBC governor Pan Gongsheng said: “Since it was announced and implemented, the policy package has received positive feedback both at home and abroad. It has vigorously boosted social confidence and played an effective role in promoting stable economic and financial performance.”
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