China’s central bank said on 4 November that banks had applied for more than 200 billion yuan in refinancing quotas under a programme supporting loans for share buybacks and purchases by major shareholders. The requests followed a meeting between the bank, financial regulators and lenders on 2 November.
The People’s Bank of China said it was strengthening the programme to support stable capital-market operations. From 4 November, the interest rate on the central bank’s refinancing fell to 1 per cent from 1.25 per cent, a reduction of a quarter of a percentage point. The reduction had been announced two days earlier.
How the lending works
The scheme works through participating banks rather than offering the central bank’s money directly to individual investors. Banks can lend to eligible listed companies buying back their own shares or to major shareholders increasing their holdings. The central bank provides refinancing support for eligible loans.
The support covers 21 nationwide banks and five systemically important city commercial banks. The refinancing has a one-year term and can be extended in response to banks’ needs. The central bank said it would continue to meet banks’ refinancing needs and help lenders connect with financing demand from companies and major shareholders.
The 1 per cent rate is the central bank’s refinancing rate, not a fixed borrowing rate for every company or shareholder. Participating banks may add a margin and determine suitable loan rates and terms. The term of a bank’s loan to a customer is therefore separate from the one-year term of central-bank refinancing.
The central bank’s support covers 100 per cent of the principal of eligible bank loans. That describes the refinancing provided against a qualifying loan; it does not mean the central bank is paying for every share purchase in full. The bank did not give a breakdown of the applications by bank or company.
The 4 November figure measures requests by banks for refinancing quotas. It is not a total of completed share purchases, and the bank did not say that the entire amount had been approved or disbursed. Whether the requests lead to loans and share purchases will depend on subsequent steps by lenders and borrowers.
A longer-term programme
The facility was launched in October 2024 with an initial quota of 300 billion yuan and a refinancing rate of 1.75 per cent. The initial quota was a starting allocation, not a statement that the current programme is capped at that amount. The new applications are a separate measure of demand for refinancing.
At the 2 November meeting, authorities said banks had signed loan agreements worth about 440 billion yuan for buybacks and increased shareholdings under the policy, with cumulative disbursements exceeding 280 billion yuan. Those totals describe lending to companies and shareholders since the programme began. They should not be added to the new bank applications as though all three figures measured the same transactions.
The meeting also set out a shift from a temporary policy to a longer-term arrangement. Twenty-six banks attended alongside representatives of other financial institutions and regulators. The aim is to encourage banks to make greater use of the facility while setting the loans’ prices on a commercial basis.
The wider market picture
The measures follow a difficult month for Chinese shares. The CSI 300 index, a benchmark of mainland-listed companies, fell 8.5 per cent in October, its worst month since early 2016. The decline provides context for the authorities’ market-stability objective; the loan-application figure alone does not establish how share prices will respond.
A separate central-bank tool is aimed at securities firms, fund managers and insurers. On 3 November, an operation under that swap facility involved 100 billion yuan, with 31 securities and fund companies bidding. It allows eligible institutions to exchange specified assets for more liquid government bonds or central-bank bills; it is distinct from the buyback refinancing programme.
A company buying back its own shares and a major shareholder buying more shares are different transactions, although both can be supported by the lending policy. Neither a loan nor a purchase guarantees that a share price will rise. Loan commitments also carry repayment obligations independently of how the purchased shares perform.
