Markets
China Calls In Banks to Steady a Slumping Stock Market
China's central bank and securities regulator met banks and fund managers on Monday to push stock-support tools after the CSI 300 lost 8.5% in October. Shanghai rose 1.1%.
Beijing has started answering its stock market's worst month in years with meetings rather than new money. On Monday, November 2, the People's Bank of China and the China Securities Regulatory Commission held a session with securities firms and fund managers on putting the existing capital-market support tools to wider use, according to reports from Shanghai Securities News and Yicai, and a separate meeting with the largest banks, joined by the National Financial Regulatory Administration, on "optimising" the relending facility that finances share buybacks and stake increases. Officials had not published an agenda.
The backdrop explains the urgency. The CSI 300 fell 8.5% in October, slipping into a bear market and posting a record twelfth straight weekly loss, Bloomberg reported. The Shanghai Composite ended October at 3,599.02, down 6.33% for the month, while the Shenzhen Component lost 15.94% and the tech-heavy ChiNext and STAR boards each dropped more than 20%. On Saturday the official manufacturing PMI came in at 49.3, below 50 for the first time since July, and on October 30 CSRC chairman Wu Qing chaired a meeting that pledged to stabilise the market.
The tools on the table date from September 2024. One is a swap facility that lets brokers, funds and insurers pledge assets to the central bank for liquidity to buy stocks; the other is the relending programme for buybacks, which started with a ¥300 billion ceiling at a 1.75% rate. In May 2025 the two quotas were pooled into ¥800 billion and the terms were loosened. Usage has been modest: more than 300 A-share companies announced buyback or stake-increase loans in the first ten months of 2026, with announced maximums of about ¥78.1 billion, according to Wind data cited by Asia Daily. One report said the quota could be raised without a fixed cap; that detail comes from a single outlet and is unconfirmed.
Markets responded before any details emerged. The Shanghai Composite was up about 1.1% at 3,639.55 in the afternoon session, and Hong Kong's Hang Seng about 0.7% at 23,450.52, a rebound helped by the bounce in Asian technology shares after Friday's US sell-off. Separately, the PBOC said it would run overnight reverse repurchase operations every working day from November 2 at a fixed 1.25%, a technical step that makes short-term funding for banks more predictable.
The limit of this approach is visible in the numbers. A facility that is used for about a tenth of its quota is not short of capacity; it is short of borrowers who want to buy. Meetings that persuade state-linked investors to use the lines can put a floor under prices for a while, as in late 2024, but a lasting turn has usually needed a change in earnings or in demand. The next readings on that come with China's October trade and inflation figures later this month.