China Reopens Stock Swap Tool After 8.5% Rout as 31 Firms Seek 100 Billion Yuan

Photo: Max12Max, Wikimedia Commons, CC BY-SA 4.0 (file photo, 2016). The People’s Bank of China headquarters in Beijing.

China’s central bank will reopen its swap facility for brokers, fund managers and insurers on Tuesday, Nov. 3, after 31 securities and fund companies applied for more than 100 billion yuan (about $14 billion), the People’s Bank of China said on Monday. The PBOC swap facility is Beijing’s main tool for putting cash in institutional hands to buy shares, and this will be its first operation since January 2025. It comes after the CSI 300 index of big Shanghai and Shenzhen stocks had its worst month since early 2016.

The central bank’s open market operations office posted the notice on Monday evening Beijing time, early Monday morning ET, after the Shanghai market had closed. The office said the operation is meant “to support the healthy and stable development of the capital market” and will carry a one-year term that “can be extended as circumstances require” (TBR translation).

How the stock swap facility works

The facility, known by its English initials SFISF, lets eligible brokers, fund companies and insurers hand the central bank bonds, stock exchange-traded funds and shares in CSI 300 companies in exchange for top-rated, easy-to-sell assets such as central bank bills. The firms can then borrow against those bills and put the money into stocks. It is a swap of assets, not a direct cash injection by the central bank, and the 100 billion yuan figure counts applications, not money already handed out.

The PBOC has not yet published a result for Tuesday’s round. The first two rounds were run as fee auctions, with results posted at 5 p.m. Beijing time, so the final size and price could differ from the applications.

Bigger demand than the first two rounds

The first operation, in October 2024, totaled 50 billion yuan, with 20 institutions bidding and a winning fee of 0.20 percentage point. The second, completed on Jan. 2, 2025, came to 55 billion yuan, again with 20 bidders, at a fee of 0.10 point. By TBR’s calculation from the PBOC notices, applications for this round are more than 80% larger than the second operation, and the number of firms is 55% higher.

The two earlier swaps are still outstanding. A readout of Monday’s meetings said the facility has been rolled over several times and has a balance of 105 billion yuan. ✓Claim by Xinhua Finance (Chinese state media); confirmed by South China Morning Post

Buyback loans become permanent at a lower rate

The swap round followed meetings on Monday morning between the central bank, the National Financial Regulatory Administration, the China Securities Regulatory Commission and financial firms. According to the official readout published by Xinhua Finance, regulators said they would add more firms to the swap facility, “appropriately lower” its fee and loosen how collateral is pledged (TBR translation). They also said a separate relending program that funds share buybacks and stock purchases by listed companies would change from a temporary arrangement into a long-term one, and its interest rate would fall to 1% from 1.25%. The South China Morning Post separately reported the quarter-point cut to 1%.

The same readout said companies had signed about 440 billion yuan of buyback and share-purchase loans under that program, and more than 280 billion yuan had been drawn. !Unverified claim, Xinhua Finance (Chinese state media) Reuters had reported over the weekend, citing the 21st Century Business Herald and the state-owned Shanghai Securities News, that the meetings would take place, as carried by The Straits Times.

By the numbers: the October rout

The CSI 300 fell 1.4% on Friday, Oct. 30, and ended October down 8.5%, Reuters reported. Reuters said the index had lost 15% over 12 weeks, the longest losing streak on record, as a sell-off in AI stocks that began with U.S. tech shares, including Alphabet, Amazon and Intel, spread to Chinese markets. That spillover from Wall Street hit Shanghai’s tech-heavy STAR50 index hardest, with a 5.5% drop that day.

Official data from China Securities Index Co., which compiles the index, show it closed at 3,985.50 on Oct. 30, its lowest close of 2026. By TBR’s calculation, that is 8.54% below the end of September, 21.2% below the year’s closing high of 5,059.66 on June 22 and 13.9% lower for the year so far. October was the third monthly loss in four months, and the drop from July through October erased all of the first-half gains.

The index rose 0.79% on Monday, to 4,016.92, before the PBOC notice came out, so that move does not reflect the swap announcement.

Bond stress and weak factory data

The stock slide has come with signs of strain in credit markets. Bonds and shares of Zhuhai Huafa Group, a state-owned property developer, sold off last week after reports that it failed to repay two maturing trust products and was talking with banks about extending loans, according to Reuters. Most exchange-traded credit bond funds lost about 0.5% on Oct. 30, their biggest one-day percentage loss on record.

The selling also followed the official October factory survey showing contraction, released on Saturday. The central bank has meanwhile been reworking how it signals interest rates, as TBR reported in its look at the PBOC’s move to an overnight policy rate.

What to watch

The next marker is the PBOC’s result notice for Tuesday’s operation, expected early on Nov. 3 ET, which should show the final amount, the number of winning bidders and the fee. The Securities Times, a newspaper owned by the People’s Daily group, quoted unnamed attendees at Monday’s meetings as saying the swap fee may be cut further and that several firms planned to put the money into the market quickly. !Unverified claim, Securities Times (Chinese state media) Those are attendees’ expectations, not official decisions. For more coverage of markets in the region, see TBR’s Asia-Pacific news.

Sources

• People’s Bank of China: SFISF tender notice [2026] No. 1 (Nov. 2, 2026)
• People’s Bank of China: SFISF operation result, Oct. 21, 2024
• People’s Bank of China: SFISF operation result, Jan. 2, 2025
• Xinhua Finance: readout of Nov. 2 swap facility and relending meetings
• South China Morning Post: Beijing launches asset swap to support China’s markets after sell-off
• Reuters via Business Recorder: China stocks book steepest monthly loss since early 2016
• China Securities Index Co.: CSI 300 daily performance

Additional sources

• Reuters via The Straits Times: Chinese regulators to hold talks on market support tools
• Reuters via The Standard: China’s central bank taps liquidity tool to fund share purchases
• Securities Times via cnfin.com: third swap facility operation
• Yicai: PBOC to conduct swap facility operation Nov. 3