China opens $71 bn ‘swap facility’ to boost markets

China’s central bank increased market assistance on Thursday by allowing businesses to purchase stocks with tens of billions of dollars in liquidity as part of a series of actions taken by Beijing to revive the nation’s struggling economy.

After failing to rekindle growth and restore corporate activity following the repeal of COVID limitations, authorities last month presented a number of stimulus measures, including lowering borrowing rates and loosening restrictions on property purchases.

The news stoked investors’ optimism that authorities would finally address the problems plaguing the economy for years, namely the property loan crisis and sluggish consumer spending, and it ignited a fire beneath mainland and Hong Kong equities.

The much-awaited news conference on Tuesday ended with a promise to fulfill the nation’s yearly growth target, but no additional measures or information beyond those that had already been revealed, which put a dampener on the initial excitement.

However, on Thursday, the central bank unveiled plans to support “the healthy and stable development of the capital market” by launching a $500 billion (or $70.6 billion) “swap facility” that will give businesses access to funds for stock purchases.

“High-grade liquid assets such as treasury bonds and central bank bills” can be secured by stocks, bonds, and other assets, according to the statement.

The programme may be “further expanded depending on the situation”, it added.

Shanghai shares rose more than one percent in early trade and Hong Kong added more than two percent.Early trading saw increases in Hong Kong’s shares of over two percent and Shanghai’s of over one percent.
The announcement of the measures came with a slew of other stimulus plans last month, which set off a wild rally that shot markets higher than 20 percent.Shanghai shares rose more than one percent in early trade and Hong Kong added more than two percent.

The measures were first announced last month alongside a raft of stimulus measures that triggered a blistering rally that sent markets up more than 20 percent.