China’s central bank yesterday boosted support for markets by opening up tens of billions of dollars in liquidity for firms to buy stocks as part of a raft of measures by Beijing to kick-start the country’s flagging economy.
Authorities last month unveiled several stimulus policies — from interest rate cuts to relaxing home-buying rules — after struggling since the end of COVID-19 restrictions to reignite growth and get business activity back on track.
Yesterday, the People’s Bank of China (PBoC) fleshed out plans to encourage “the healthy and stable development of the capital market” by opening up a “swap facility” worth 500 billion yuan (US$70.6 billion) that would allow firms to access cash to buy stocks.
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Companies would be allowed to use equities, bonds and other assets as collateral for “high-grade liquid assets such as treasury bonds and central bank bills,” the central bank said.
The program might be “further expanded depending on the situation,” it added.
The move helped the Shanghai Composite Index rise more than 1 percent, having dived more than 6 percent on Wednesday — its worst day in more than four years.
Hong Kong’s Hang Seng Index rose 3 percent, building on the previous day’s advance that followed a plunge of more than 9 percent, its heftiest in 16 years.
China faces multiple issues including a prolonged crisis in the property sector, chronically low consumption, high unemployment among young people and elevated local government debt, with analysts saying more direct state support is needed to boost consumption and achieve the government’s 5 percent growth target for this year.
An analyst said the central bank had been “doing much of the heavy lifting in the latest wave of stimulus.”
“The PBoC recognizes the urgency needed to address the economic issues in China,” Moody’s Analytics economist Heron Lim (林師順) said.
“But the PBoC actions are only one part of the equation in boosting sentiment,” he said. “What is required now is the action plan for fiscal support to come through.”
Traders are hoping that plan comes tomorrow, when Chinese Minister of Finance Lan Fo’an (藍佛安) is set to hold a briefing on fiscal policy in Beijing.
Lan would outline “countercyclical adjustment of fiscal policy to promote high-quality economic development,” the State Council Information Office said in a statement on Wednesday.
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