China Stocks Suffer Worst Monthly Drop in a Decade as Authorities Unveil More Support Measures

PBOC, NFRA and CSRC hold meetings

Relending rate for share buybacks cut to 1% from 1.25%

Third round of swap support for securities firms, funds and insurers

CSI 300, China's version of the Kospi, falls 8.5% in October

Chinese financial authorities have rolled out a new set of support measures in response to a sharp selloff in the country's mainland stock markets, including Shanghai and Shenzhen. The steps include cutting the relending rate for listed companies' share buybacks and planning additional liquidity support for institutional investors.

The People's Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission recently held a series of meetings on two support programs, according to Caixin, Yicai and Bloomberg. The programs are a swap support facility for securities firms, funds and insurers, and support for listed companies' share buybacks and stake increases. Both were introduced in October 2024.

The PBOC has turned the relending facility for share buybacks and stake increases from a temporary measure into a long-term program. It also lowered the annual relending rate to 1% from 1.25%. Under the arrangement, the central bank supplies low-cost funds to commercial banks, which then relend the money to listed companies.

The CSRC will conduct the third round of its swap support program for securities firms, funds and insurers. The facility lets institutional investors swap assets they hold for highly liquid government bonds and use them to raise funds in the market. Thirty-one securities firms and funds are participating, with applications totaling 100 billion yuan. The swap term is one year and can be extended.

Authorities also plan to ease margin trading rules for listed companies. In January, China raised the margin requirement ratio for financing transactions to 100% from 80%, and it plans to readjust indicators including the valuation ratio for collateral securities. Officials are also reviewing ways to increase stock-market inflows from long-term investors such as pension funds and insurers.

The latest measures came after Chinese stocks posted their biggest monthly decline in a decade in October, Reuters reported. The CSI 300 Index, often called China's version of the Kospi, fell 8.5% during the month. Investor sentiment weakened as the property downturn dragged on and big tech shares slumped.

Still, some investors say the latest steps may have only a limited effect. Fu Zhicheng, chief investment officer at Shanghai Qingzhou Investment Management, told Bloomberg on Nov. 3 that the moves should be viewed as a policy signal aimed at stabilizing markets ahead of the U.S. midterm elections. He added that because both programs have already been in operation since 2024, any additional support effect may be limited.

Lee Mi-ah, Hankyung.com reporter mia@hankyung.com