(Yicai) Nov. 3 -- China’s financial regulators have pledged to optimize the relending facility for share buybacks and shareholding increases, making it a long-term arrangement to stabilize the capital market and shore up investor confidence.

The People’s Bank of China will cut the relending rate offered to financial institutions to 1 percent from 1.25 percent, the central bank announced yesterday at a meeting it jointly held with the National Financial Regulatory Administration and the China Securities Regulatory Commission. Financial institutions will then set lending rates reasonably and with appropriate spreads based on the relending rate and expanding credit supply under market-oriented pricing principles.

China introduced the relending facility for share repurchases and shareholding increases in October 2024. Under the scheme, the PBOC provides 100 percent principal relending support for commercial bank loans issued to fund listed firms’ share buybacks and major shareholders’ share increases. In May 2025, state-owned capital operation platforms China Guoxin and China Chengtong were brought into the scope of eligible borrowers.

Turning the relending facility into a permanent arrangement will stabilize expectations among market participants, reduce risk premiums stemming from policy uncertainty, and shift share buybacks and shareholding increases from crisis-driven moves to regular market stabilization tools, Dong Ximiao, chief researcher at Merchants Union Consumer Finance, told Yicai.

The relending rate cut to 1 percent will improve macro interest rate signals and smoothly channel low-cost capital to enterprises with genuine repurchase demand, Dong added.

"A total of 902 listed firms have secured approvals for 1,110 loan applications for share repurchases and shareholding increases,” a senior CSRC official said yesterday. “Adding the credit lines granted to China Guoxin and China Chengtong, the total loan ceiling now stands at about CNY4.4 trillion (USD659.7 billion)."

"China Guoxin and China Chengtong are state-owned capital operation platforms under the State-Owned Assets Supervision and Administration Commission of the State Council,” an industry insider told Yicai. “They obtained special relending quotas of CNY800 billion (USD120 billion) and CNY1 trillion, respectively."

China Guoxin and China Chengtong stepped into the market for the first time in April last year after a slump in major stock indexes triggered by the US’ so-called ‘reciprocal tariffs.’ They mainly purchased central SOE stocks, technology equities, and industry exchange-traded funds with their own capital to boost market sentiment. They again launched share buybacks after tech stocks tumbled in July, this time through the PBOC relending facility.

Weighed down by a pullback in overseas tech shares, China’s stock market experienced a notable correction in October. The benchmark CSI 300 Index, whose constituents are the top 300 stocks on the Shanghai Stock Exchange and Shenzhen Stock Exchange, fell 8.5 percent.

The SZE ChiNext Index, which tracks China’s growth enterprises, plunged 23 percent in October, and the SSE Star Composite Index, which reflects the performance of China’s sci-tech innovation board, slumped 22 percent.

The PBOC also said yesterday it will conduct a third operation of the Securities, Funds, and Insurance Companies Swap Facility today, with lower swap fees and better collateral rules, to help financial institutions secure funding and improve their ability to purchase shares.

Editors: Tang Shihua, Futura Costaglione