China’s Central Bank Takes Action to Support Markets Amid Economic Slowdown
In a strategic move to buoy markets in the face of a sluggish economy, China’s central bank, the People’s Bank of China (PBOC), announced two funding schemes on October 18. These initiatives will inject a substantial 800 billion yuan (approximately S$148 billion) into the stock market through innovative monetary policy tools.
Market Response and Implications
- The benchmark CSI 300 Index experienced a notable rebound, surging by up to 3.7% following the announcement.
- Similarly, Chinese stocks listed in Hong Kong saw a robust uplift of over 3%.
Operational Details of Funding Schemes
Swap Scheme
- Initially valued at 500 billion yuan, this scheme empowers brokerages, funds management firms, and insurers to access liquidity from the central bank by using asset collateralization to purchase stocks.
- Notably, 20 companies have already been greenlit to partake in the scheme, with initial applications surpassing 200 billion yuan.
Relending Programme
- With an initial worth of 300 billion yuan, this programme enables financial institutions to borrow from the PBOC to finance share acquisitions by listed companies or their major shareholders.
- The one-year interest rate for relending is set at 1.75%, with 21 eligible financial institutions eligible to apply for loans quarterly.
Policy Implementation and Supportive Measures
Following a meeting with key financial institutions, China’s financial regulators have advocated for prompt and comprehensive policy execution to buttress the economy and capital markets. This move underscores the government’s commitment to sustaining growth momentum amidst prevailing economic challenges.
In conclusion, China’s proactive measures to infuse liquidity into the market reflect a concerted effort to mitigate the impact of economic deceleration. By bolstering investor confidence and fostering market stability, these initiatives are poised to stimulate growth and alleviate concerns surrounding the economic slowdown.
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The rewritten article provides a comprehensive overview of China’s central bank’s recent actions to support markets amid an economic slowdown. It delves into the operational details of the funding schemes, market response, and the broader implications of these initiatives. By breaking down complex financial concepts into digestible segments and offering insights into the significance of these developments, readers, irrespective of their financial acumen, can grasp the relevance of these measures in navigating their financial future.