China stocks suffer their worst month in 10 years; authorities launch emergency stimulus measures [Lee Seok-woo's China 24]

[Financial News] As China's stock market recorded its worst monthly decline in 10 years since 2016 amid a fall in the benchmark CSI 300, Chinese financial authorities—including the central bank, the People's Bank of China (PBC), the National Financial Regulatory Administration (NFRA) and the China Securities Regulatory Commission (CSRC)—and executives from major banks moved to prepare emergency measures to stabilize the market.
According to local media including Cailian Press, the People's Bank of China (PBOC) and Chinese financial officials held an emergency meeting on the 2nd and decided to implement measures including expanding the use of an 800 billion yuan (161.784 trillion won) stock market fund, easing relending terms for share buybacks and increases in shareholdings, expanding stock purchases by financial institutions and state-owned enterprises, and boosting liquidity through new monetary policy operations.
The CSRC also decided to step up measures including suspending securities lending, cracking down on informal short selling, and tightening restrictions on short-term trading.
Under the relending program, the central bank provides low-interest funds to commercial banks and supports them in lending the money to companies for share buybacks or to major shareholders to increase their stakes. The program is intended to increase the funds available for stock purchases and ease downward pressure on the market.
They aim to stabilize the falling stock market and prevent it from dropping further, while stopping risks from spreading across financial markets, including the bond market and the banking, insurance and fund sectors.
The PBOC plans to increase liquidity, while state-owned financial institutions and public enterprises will expand stock purchases and listed companies will buy back their own shares to ease selling pressure.
The CSI 300 index, composed mainly of large-cap mainland Chinese stocks, plunged 8.5% over October and entered a bear market. On a weekly basis, it fell for 12 consecutive weeks, dropping 15% and setting a record for its longest-ever losing streak.
The stock market's weakness is rooted in slowing domestic demand and uncertainty over the earnings of AI-related companies. As doubts grow over whether increased investment in AI will translate into actual corporate profits, selling pressure has mounted, particularly on technology stocks.
China's recently released official manufacturing and non-manufacturing purchasing managers' indexes (PMIs) for October both fell below 50, indicating economic contraction and signaling that economic activity was slowing simultaneously in manufacturing, services and other sectors.
The market is watching to see whether Chinese authorities will announce further, more fundamental measures to restore investor sentiment, going beyond simply providing liquidity. From that day through the 6th, the Standing Committee of the National People's Congress plans to deliberate on and approve the scale of major fiscal stimulus measures, including the direction of national fiscal policy and the issuance of special treasury bonds.
[email protected] Lee Seok-woo, International Affairs Specialist Reporter