SCIO briefing on financial policy package to stabilize the market and expectations

National Business Daily:

Mr. Pan just mentioned that the central bank launched two monetary policy tools to support the capital market in the fourth quarter of last year. Everyone is curious: what efforts has the central bank made over the past six months? What effects have been achieved by applying these tools according to your evaluation? Looking ahead, what steps will be taken to enhance them? Thank you.

Pan Gongsheng:

Last year, the PBC created two tools to support the capital market in collaboration with the CSRC and NFRA. I announced this development here in September last year. The initial quotas for these two supportive tools were 500 billion yuan and 300 billion yuan, respectively. They met market demand and were widely welcomed. These tools played an important role in boosting investor confidence, improving financial market expectations, and enhancing the inherent stability of the capital market.

These two tools are designed entirely based on market principles, providing important support for listed companies to manage market value through repurchasing shares and increasing holdings. Swap facilities enhance the access to capital of participating entities, while reloan mechanisms for repurchasing shares and increasing holdings provide low-cost funds to commercial banks for issuing related loans. The market participants using these two tools can independently decide the timing and scale of stock purchases. Currently, the swap facility tool has been used twice, with a total amount of 105 billion yuan. Over 500 listed companies and major shareholders have announced the use of loans for stock buybacks and increased holdings with a total amount of about 300 billion yuan.

These two tools have embedded counter-cyclical adjustment properties, mainly to provide support. The logical mechanism behind them is that when the capital market is significantly undervalued, securities institutions, listed companies and major shareholders will have a stronger willingness to use the low-cost funds provided by these two tools to buy stocks, thereby breaking the negative cycle of market downturns. For instance, last November, around New Year's Day this year, and in early April when the U.S. imposed excessive tariffs, the usage of swap facilities increased significantly. Listed companies were also quite active in repurchasing shares and increasing holdings. The internal stability mechanism established through these measures has effectively corrected market overshooting and stabilized expectations in the capital market.

Throughout the policy implementation process, the PBC has been working closely with the CSRC and NFRA to continuously summarize practical experiences. These two tools are also frequent topics in my discussions with Mr. Wu. Based on feedback from various stakeholders, we have continuously refined the policy elements of these tools and enhanced their implementation efficiency.

First, the total quota of 800 million yuan for the two tools has been combined for unified use. With the quotas now integrated, funds can be allocated between both tools, which enhances the convenience and flexibility, better meeting the needs of different types of market entities.

Second, in terms of swap facilities, the CSRC has expanded the pool of participating institutions from the initial 20 brokerage firms and funds to 40 institutions. The range of acceptable collaterals now covers Hong Kong-listed shares and restricted shares, among others. Additionally, the CSRC has guided financial infrastructure providers to lower their service fees.

Third, we've extended the maximum term for the stock repurchase and increased holdings relending facility from one year to three years, encouraging banks to issue credit loans. We have also reduced the required proportion of listed companies' own funds used in stock repurchases and increased holdings from 30% to 10%. Additionally, in consultation with the State-owned Assets Supervision and Administration Commission, we have included two state-owned capital operation platforms — China Chengtong Holdings and China Reform Holdings — into the support framework. These two companies have already announced plans to use a total of 180 billion yuan from these tools to increase their holdings in listed companies.

In addition, as Mr. Wu just mentioned, Central Huijin Investment plays an important strategic role in maintaining the stability of the capital market. The PBC firmly supports the company in intensifying its purchases of stock market index funds when necessary and will provide ample refinancing support to resolutely safeguard the stable operation of the capital market. Thank you.