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E-mail China.org.cn, February 28, 2025
CCTV:
As mentioned earlier, the PBC introduced two new monetary policy tools last year to support the stable development of the capital market. I'd like to ask: How are these two monetary policy tools currently performing? What additional measures are planned for the future? Thank you.
Xuan Changneng:
I'd like to invite Mr. Zou to answer these questions.
Zou Lan:
Thank you for your questions. The capital market is both a "weather vane" of confidence and a vital channel for allocating financial resources, closely tied to economic development. Relevant departments have continually enhanced the functions of the capital market to give balanced weight to investment and financing, promoting its stable, healthy development through a series of policy measures. An important aspect of this is strengthening listed companies' responsibility for market value management while leveraging securities firms, funds and other institutional players as main stabilizing forces in the market. Current regulatory provisions do not allow companies to take out loans to purchase stocks. Related securities institutions are also facing funding shortages. In response, the PBC has created two tools to support the stable development of the capital market and enhance the financing and investment capabilities of relevant institutions, creating conditions and providing incentives for them to continuously implement new management requirements.
The two tools adhere to market-oriented and law-based principles. Listed companies and institutional players can independently decide the timing and scale of stock purchases based on market conditions, which helps leverage the market's selection functions and correct over-adjustments in the capital market. Since September last year, confidence in the capital market has significantly increased, with both trading volume and market indices rising substantially. This has given relevant companies and institutions more time to familiarize themselves with the new tools, make necessary preparations, and retain flexibility for using them when needed. By the end of 2024, the cumulative operations of securities, funds and insurance companies' swap facilities had exceeded 100 billion yuan. Financial institutions had signed stock repurchase and share increase reloan agreements with more than 700 listed companies or major shareholders, with a value exceeding 30 billion yuan. The market-wide disclosed ceiling for stock repurchase and share increase plans in 2024 had approached 300 billion yuan.
When the market value of stocks is significantly underestimated, listed companies, major shareholders and securities institutions, driven by their own interests, will have sufficient willingness to use the low-cost incremental funds provided by the two tools to repurchase or increase their holdings of stocks. This creates an inherent stabilizing mechanism that can effectively stabilize the market and curb its negative circulation. The PBC will further improve tool design and institutional arrangements based on practical experience to date, continuously enhancing the tools' accessibility. Relevant enterprises and institutions can obtain sufficient funds as needed to increase investment.
Thank you.
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