China has unveiled new measures to boost its stock market as recent data revealed the country’s economic growth has slowed to its weakest pace in six quarters.
The People’s Bank of China (PBOC) rolled out two key funding schemes on Friday, injecting up to 800 billion yuan ($113 billion) into the market to stabilize capital flows and encourage stock purchases.
The PBOC introduced a swap scheme worth 500 billion yuan, enabling brokerages, asset managers, and insurers to obtain liquidity through asset collateralization for stock purchases. Additionally, a 300 billion yuan relending program will offer low-interest loans to financial institutions, allowing companies and their major shareholders to finance stock buybacks and other market-supporting activities.
These initiatives come as China’s economy grew by 4.6% in the third quarter, slightly down from the previous quarter’s 4.7%, despite signs of increased consumer activity in September. China’s benchmark CSI 300 Index responded positively, rallying 3.6% on Friday after the central bank’s announcement, marking its first major increase in four days.
The Chinese government’s broader strategy, including these financial mechanisms, aims to mitigate concerns around the country’s economic slowdown and support long-term market stability. However, as analysts have pointed out, while these efforts may boost short-term market performance, there is caution around how effective they will be in sustaining longer-term economic growth.
Bloomberg, Market Watch, and Reuters contributed to this report.
