China’s Central Bank Launches $7 Billion Swap to Support Stock Market

China’s central bank, the People’s Bank of China (PBOC), initiated its first swap operations on Monday under a newly established facility aimed at stabilizing the stock market. The PBOC exchanged assets worth 50 billion yuan ($7 billion) with brokerages, fund companies, and insurers as part of the move.

In the first round, 20 institutions, including China International Capital Corp (CICC), Citic Securities, and China Asset Management Co., participated in the swaps at a fee rate of 20 basis points. This facility is a key part of China’s broader efforts to boost its stock market and revitalize an economy weakened by ongoing issues in the property sector and sluggish consumer spending.

Reviving Market Sentiment

The facility, introduced on Friday, is part of an initiative worth 500 billion yuan. It allows financial institutions to exchange riskier assets, such as stock ETFs and blue-chip shares, for more liquid assets like treasury bonds and central bank bills. The goal is to provide easier access to funding, thereby supporting market liquidity and encouraging investment.

While Chinese stocks surged in response to aggressive stimulus measures unveiled on September 24, enthusiasm has waned in recent weeks, leading to a more cautious market environment.

Additional Market Support Measures

In addition to the swap facility, over 20 Chinese-listed companies, including major players like Sinopec and China Merchants Port Group, have announced plans to utilize special central bank lending for share buybacks and purchases. This scheme, also valued at 500 billion yuan, is designed to further bolster market confidence by encouraging corporate investments in their own shares.

These measures reflect China’s commitment to stabilizing its stock market amid ongoing economic challenges and market volatility.