Chinese banks have received applications worth more than 200 billion yuan ($30 billion) under a central bank scheme designed to support stock purchases and share buybacks. The People’s Bank of China (PBOC) said on Wednesday that it was stepping up efforts to improve the program and support stable operations in the country’s capital markets.
The move comes as Beijing seeks to strengthen confidence in listed companies and encourage more investment in the domestic stock market. By making loans cheaper for share purchases and buybacks, the central bank aims to help companies and major shareholders increase their market value.
A key part of the latest action is a reduction in the interest rate charged on re-lending funds used for share buybacks and share acquisitions. The PBOC said the rate would fall by 0.25 percentage points to 1%, effective Wednesday.
The lower rate is expected to reduce financing costs for banks that provide loans under the scheme. Banks can then set their own lending rates by adding a reasonable spread to the central bank’s re-lending rate.
The PBOC said this arrangement would help speed up loan distribution and improve the market capitalisation of listed companies and their major shareholders. It also gives banks flexibility to decide suitable loan terms and interest rates based on their lending arrangements.
The scheme is part of China’s wider effort to use financial policy tools to support its stock market. Share buybacks allow listed companies to purchase their own shares, reducing the number of shares available in the market. Such purchases can also signal that company leaders believe their shares are undervalued.
Share acquisition loans can provide financing for eligible investors or major shareholders seeking to purchase company shares. By lowering borrowing costs, the central bank hopes to make these transactions easier to finance.
The PBOC said it had intensified the implementation of policies covering share buybacks and increased re-lending. The central bank’s latest comments suggest that it wants financial institutions to move more quickly in processing applications and distributing funds.
The announcement followed a meeting on Monday between the central bank, financial regulators and major banks. The discussions focused on improving the re-lending policy and making its implementation more effective.
The meeting brought together institutions responsible for monetary policy, financial supervision and securities markets. Their involvement highlights the importance Beijing places on coordinating financial support measures.
The applications exceeding 200 billion yuan indicate substantial interest in the lending scheme. However, the figure represents applications received by banks and does not necessarily mean that the full amount has already been approved or distributed.
The reduction in the re-lending rate is intended to encourage further participation. A lower funding cost can give banks more room to offer competitive loan rates while maintaining a reasonable spread.
For listed companies, easier access to financing could provide additional support for share repurchase plans. Companies may use buybacks to manage their capital structure, return funds to shareholders or respond to weak market valuations.
Major shareholders could also benefit from more accessible financing when purchasing shares. Such activity may increase demand for listed stocks and help support market prices, although the impact will depend on how much of the approved financing is ultimately used.
The policy also reflects China’s broader approach to stabilising its financial markets. Authorities have introduced several measures in recent years to encourage investment, improve market confidence and support the value of domestic companies.
The central bank’s latest step focuses on reducing financing costs rather than directly purchasing shares. This allows banks to provide credit through the financial system while the PBOC supports the process through its re-lending facilities.
The effectiveness of the program will depend on how quickly banks process applications and how much demand comes from eligible companies and shareholders. Market conditions, investor confidence and the financial position of borrowers will also influence the results.
The PBOC has not said how much of the more than 200 billion yuan in applications has been approved. Further details on loan distribution could provide a clearer picture of how strongly the scheme is being used.
For now, the central bank’s decision to lower the re-lending rate to 1% marks another effort to make share buybacks and stock acquisitions more affordable. Beijing hopes that faster lending and lower costs will encourage greater market participation and help strengthen the value of China’s listed companies.
