On November 2, the People's Bank of China, together with the National Financial Regulatory Administration and the China Securities Regulatory Commission, held a symposium on the Securities, Fund and Insurance Companies Swap Facility (SFISF) and a symposium on relending for stock buybacks and increased holdings, arranging for the two major policy tools to be fully and effectively used.
The meetings made clear that the relending policy for stock buybacks and increased holdings will shift from a phased arrangement to a long-term institutional arrangement, with the relending rate cut from 1.25% to 1%. On the same day, the PBOC announced that on November 3 it would conduct an SFISF operation with a one-year swap term that can be extended as circumstances require.
The two policy tools will inject incremental funds on the scale of hundreds of billions of yuan into the market. Professionals said that at present, the capital market is in a critical period of expectation gaming and volatile divergence. The joint statements by the three departments mark the strengthening resonance between monetary policy and capital market policy. This reflects the regulators' determination to prevent abnormal market fluctuations, and shows even more clearly that the care for liquidity is moving from expectation guidance to substantive implementation, injecting a certain "policy bottom" expectation into the market and helping stabilize investor confidence at a key moment.
Swap facility expands coverage and cuts costs, continuously bringing in "fresh water"
According to PBOC disclosures, since its launch, the swap facility has been extended multiple times, and its current balance stands at 105 billion yuan. At the symposium, regulators proposed conducting swap facility operations in due course, further increasing the number of participating institutions, appropriately lowering swap fees, and optimizing pledge and operational models.
That evening, the PBOC issued an announcement: the third operation will be conducted on November 3, with a one-year swap term that can be extended as circumstances require. At present, 31 securities and fund companies have declared demand, with requested quotas exceeding 100 billion yuan.
Since the creation of the swap facility tool, two operations have been carried out, in October 2024 and January 2025 respectively. Chang'an Street Knowledge (WeChat ID: Capitalnews) noted that the declarations for the third swap facility operation were noticeably stronger than in the previous two rounds.
"This round, with 31 institutions declaring and quotas exceeding 100 billion yuan, is an important step for the swap facility from a pilot involving leading firms to broad participation," said Dong Ximiao, chief economist of Zhaolian and executive director of the Shanghai Finance and Development Laboratory. The previous two rounds each involved only 20 institutions, with relatively narrow coverage, and some non-leading brokerages and funds found it difficult to obtain liquidity support. The increase in participating institutions to 31 is intended to give more non-bank institutions a stable channel for supplementary funds, thereby expanding the coverage of funds that stabilize the market.
In Dong Ximiao's view, the direct effect of the expansion in quota is reflected on the financing side. "A substantial increase in quota means this cost advantage is being put to practical use by more institutions. Participating institutions have clearly stated that after successful declaration they will put incremental funds into the capital market as soon as possible, which will directly enhance non-bank institutions' financing capacity and inject observable incremental funds into A-shares."
"This operation shows a significant leap in participation breadth, market recognition and institutional flexibility," Tian Lihui, a finance professor at Nankai University, told Zhishi. The single-round declaration volume of the third operation is already close to the total of the previous two operations, and participating institutions have shifted from "being arranged" to "actively seeking." This shows that the swap facility is transitioning from a targeted arrangement to a more broadly covering normalized liquidity mechanism.
"The key is not the quota itself, but the marginal shift in policy focus from 'giving quota' to 'promoting use,'" said Fu Yifu, a special researcher at Sushang Bank. In its design mechanism, the swap facility does not directly inject base money, but after institutions swap securities and finance into the market, liquidity may still indirectly come from the banking system, with a transmission path shorter and more targeted than reserve requirement cuts or interest rate cuts.
"Another important change is in price," Tian Lihui said. The winning bid fee has already fallen from 20 basis points in the first operation to 10 basis points in the second, and this time it is expected to remain low, or even decline further. He said that expanding capacity solves the question of "who can come in," while fee reduction solves the question of "whether it is worthwhile to come in." The two adjustments work together, with the goal of turning declaration willingness into actual market entry.
Buyback and increase-holding relending shifts to a long-term arrangement
At the listed company level, buyback and increase-holding loans support listed companies and major shareholders in entering the market with "real money," which is an internationally common method of market value management and provides direct and real support for stock prices.
On the same day, the latest data disclosed by the CSRC showed that across the market, 902 listed companies have disclosed 1,110 buyback and increase-holding loan announcements. Adding the increase-holding loans applied for by the two state-owned capital operation companies, China Reform Holdings and China Chengtong, the upper limit of applied loan quotas has now accumulated to about 440 billion yuan. According to PBOC disclosures, the cumulative amount of stock buyback and increase-holding loans issued has exceeded 280 billion yuan.
The regulators' meeting this time released very key information: the relending policy for stock buybacks and increased holdings will shift from a phased arrangement to a long-term institutional arrangement, with the relending rate cut from 1.25% to 1%; financial institutions will adhere to the principle of market-based pricing, reasonably add margins on top of the relending rate and increase loan disbursement.
"This word 'shift' carries enormous weight," Chen Duan, director of the Digital Economy Integration and Innovation Development Center at the Central University of Finance and Economics, told Zhishi. It means that this tool is no longer positioned as a temporary means to respond to fluctuations at a specific point in time, but has become a long-term mechanism for safeguarding the inherent stability of the capital market. In the view of Wei Fengchun, chief economist at Chuangjin Hexin Fund, a normalized institutional arrangement can establish an inherent stabilizing and balancing mechanism for the capital market, provide sustained underpinning support for the market, help stabilize market expectations, strengthen investor confidence, and promote the long-term healthy development of the capital market.
"Supporting policy optimizations, such as extending loan terms and lowering the proportion of self-owned funds contributed, are institutional arrangements that lower the threshold and stabilize expectations," Chen Duan believes. Their purpose is to make listed companies willing to borrow, willing to buy and willing to hold for the long term.
After the policy optimization, how can it be better implemented going forward? "Increase the coverage of special relending for listed company stock buybacks and increased holdings." A relevant official of the CSRC said that the CSRC will guide the rollout of more landmark cases with strong market influence, such as weight index companies and leading technology stocks. At the same time, it will urge listed companies that have already disclosed buyback and increase-holding loan plans to accelerate implementation, and companies that have already applied for loans to increase the intensity of buyback implementation, sustaining the current good momentum of loan-funded buybacks and increased holdings and actively contributing to capital market stability.
Stabilizing the market through policy is not "flooding" the market
Looking back at the past October, major A-share indexes fell collectively, with the Shanghai Composite successively losing the three integer levels of 3,800, 3,700 and 3,600 points. Against the backdrop of recent consecutive deep market adjustments, regulators stepping in released a clear signal of deepened regulatory coordination and strong bottom-line thinking in policy.
"The biggest signal released by this meeting is not how large a quota any single tool has produced, but that capital market support tools have completed a fundamental upgrade in policy positioning," Chen Duan believes. Policy has officially shifted from emergency point-in-time action to a normalized institutional arrangement, and uses a combination of monetary, industrial and expectation-guidance measures to form a complete systemic market-stabilization framework.
Affected by this positive news, on November 2, A-shares staged a "good start" on the first trading day of November. That day, the three major A-share indexes opened higher and moved higher, closing collectively up. As of the close, the Shanghai Composite rose 1.08%, the Shenzhen Component rose 1.63%, the ChiNext Index rose 1.87%, and the STAR 50 rose more than 3%. More than 4,600 stocks across the market rose, and more than 100 stocks hit the daily limit.
"The market showed a volume-backed rebound, greatly boosting investor confidence and easing the panic of many investors," said Yang Delong, chief economist at Qianhai Open Source Fund. In his view, the regulators' move undoubtedly released a positive signal that policy is strongly supporting the market. It is like "timely rain," greatly alleviating market panic.
"From the dual dimensions of micro liquidity and macro risk appetite, it consolidates the foundation for market stabilization," Tian Lihui said. On the funding side, the swap quota of more than 100 billion yuan will directly transform into high-grade collateral for non-bank institutions, injecting real incremental funds into the stock market through pledged financing and effectively improving micro trading activity in the market.
"This targeted funding will mainly flow to broad-based index funds and core blue-chip assets," Tian Lihui believes. This will not only help raise the valuation "base" of core market assets, but also play the role of a "ballast stone," comprehensively enhancing the capital market's inherent stability against external shocks.
However, Chen Duan believes that the effect of this coordinated policy package on the market is mainly not a one-time capital shock, but anchoring at the expectation level and strengthening of the internal stabilization mechanism. It is more likely to play a role in repairing market confidence and improving trading sentiment, rather than simply pushing the index up.
"It is not appropriate to simply equate this operation with 'the central bank flooding the market to support it,'" Fu Yifu also warned. The essence of the swap facility is to clear blockages in liquidity transmission on the non-bank side and turn approved quotas into real market-entry funds. The direction of incremental funds is certain, but the scale depends on the pace of declarations and fund use. Its core role is to underpin expectations and curb procyclical contraction, rather than create a one-way rise.
CSRC releases three "warm" signals
It is not only the two policy tools that are being strengthened; more positive news for stabilizing the market and expectations is on the way. On the evening of November 2, an official of the relevant department of the CSRC introduced that it will actively release "warm" signals to the market in multiple areas including listed company buybacks, active ETFs, and margin trading and securities lending.
Conducting share buybacks is an important tool for listed companies in market value management, and also an important way for listed companies to stabilize their own stock prices and demonstrate and convey development prospects and confidence. The official introduced that in the first 10 months of this year, 645 listed companies on the Shanghai and Shenzhen markets disclosed 700 share buyback plans worth 237.7 billion yuan, of which the amount for buyback cancellation was 115 billion yuan, accounting for nearly 50%. A total of 747 companies actually implemented buybacks worth 134.5 billion yuan. The amount of buyback plans, the actual buyback amount, and the buyback cancellation amount and its proportion all hit record highs.
The CSRC also said it plans to adjust and optimize buybacks of shares necessary to safeguard company value and shareholder rights and interests, known as market-support buybacks. For example, it will add stock price "breaking below issue price" as one of the circumstances in which market-support buybacks can be conducted, stipulate that market-support buybacks are not subject to the restriction that "company shares must have been listed for six months," and remove the restriction that declarations cannot be made during the opening and closing call auction stages of market-support buybacks.
Regarding the first batch of 18 active ETFs that have recently attracted market attention, the official introduced that as of November 2, the first batch of 18 active ETFs had raised more than 35 billion yuan in total, of which 16 products had reached the single-product fundraising scale cap of 2 billion yuan and ended fundraising. Next, the CSRC will guide and encourage the 18 active ETFs that have completed fundraising to accelerate investment and position building.
Margin trading and securities lending is one of the important foundational systems of the capital market, playing a positive role in smoothing irrational fluctuations, promoting price discovery, attracting medium- and long-term funds into the market, and meeting investors' financing needs. The official said that recently, margin balances and trading activity have declined noticeably, and the overall leverage level has tended to be prudent. To stabilize the capital market, boost investor confidence, and promote the functioning of margin trading and securities lending, the CSRC will work with stock exchanges to guide securities companies in conducting coordinated research on risk control indicators such as margin deposit ratios, conversion rates of securities eligible as margin, and maintenance guarantee ratios, further optimize them, and maintain flexibility.
"On the basis of overall controllable risks, and in accordance with statutory countercyclical adjustment arrangements, appropriately release financing space, revitalize existing funds, and enhance market liquidity," the official said.
News background
In October 2024, the People's Bank of China, together with relevant departments, created two monetary policy tools to support the capital market: the Securities, Fund and Insurance Companies Swap Facility, or "swap facility," and relending for stock buybacks and increased holdings. The swap facility provides liquidity support to securities, fund and insurance companies through a "securities-for-securities" approach, enhancing institutions' ability to obtain funds and invest in stocks; relending for buybacks and increased holdings provides low-cost loans to listed companies and major shareholders to support their buybacks and increased holdings of stocks.
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