China combines quotas of two monetary policy tools to bolster capital market

 China's central bank announced Wednesday that it will combine the quotas of its two monetary policy tools to further support the capital market.

The Securities, Funds and Insurance companies Swap Facility (SFISF), with an initial scale of 500 billion yuan (about 69.4 billion U.S. dollars), and the 300-billion-yuan re-lending facility that supports stock buybacks and shareholding increases, will be operated under a shared quota of 800 billion yuan, according to the People's Bank of China (PBOC).

The decision, effective Wednesday, is expected to make the two facilities more convenient and flexible to better meet the varied needs of institutions and strengthen the inherent stability of the capital market, the PBOC said in a statement.

The two tools, both launched last October to bolster the capital market, have operated under market-oriented principles and played a positive role in promoting the stable operation of the capital market, the central bank said.

The SFISF allows eligible securities, funds and insurance companies to use their assets, including bonds, stock ETFs, and holdings in constituents of the CSI 300 Index, as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills.

The central bank has so far conducted two SFISF operations with a total scale of 105 billion yuan, and over 500 listed companies and major shareholders have reported using the re-lending facility to repurchase shares or increase their holding, according to Pan Gongsheng, governor of the central bank. ■