Following a shaky start to the new year, China’s leading securities regulator revealed plans to establish a mechanism to stabilise the market. In conjunction with this announcement, the agency committed to aligning market expectations for 2025.
After a recent meeting focused on its yearly priorities, the China Securities Regulatory Commission released a statement pledging to foster and sustain a stabilizing and positive market momentum. The statement emphasized that maintaining stability remains the commission’s highest priority for 2025.
Alongside enhancing the establishment of a market-stabilization mechanism, the China State Securities Regulatory Commission (CSRC) has revealed plans to work with the People’s Bank of China to boost the efficiency of two structural monetary policy tools.
Although the regulator provided no specific details about the system’s operation, it committed to enhancing its policy guidance and stated it would promptly address concerns raised by the economy.
Proposed State-Backed Stabilization Fund to Revive China’s Stock Market
The Central Securities and Exchange Commission (CSRC) mentioned a liquidity support facility as one of the two structural monetary policy tools. This facility enables institutional investors to obtain funds for stock purchases from the People’s Bank of China (PBOC).
The second type of facility is a swap facility, which allows financial institutions such as insurance companies, funds, and securities firms to obtain liquidity from the central bank to purchase stocks.
Governor Pan Gongsheng stated that the initial allocation of funds is 800 billion yuan, or approximately 109 billion dollars. However, depending on demand, this amount could potentially double or even quadruple.
Beijing presented a comprehensive review of the economy and markets at the end of September. At the end of September,
One element was the establishment of a potential stabilisation fund that the state would support. However, no new information has been provided regarding the progress made since then.
Investors have avoided the Chinese equity market due to concerns regarding the country’s escalating geopolitical dangers and slow economic recovery. The stock market has tripped into the new year, declining in every session except one.
As of the beginning of this year, the benchmark CSI 300 Index has, according to statistics collated by Bloomberg, the highest such performance for the beginning of any year, and at the beginning of this year, the worst statistics collated by Bloomberg.
The CSRC is also committed to improving the inclusiveness and adaptability of institutions, simplifying the process of bringing medium—and long-term capital into the trading market and improving connectivity between the Chinese financial and global capital markets.
