China's stock market suffers its worst month in 10 years as authorities roll out emergency stimulus measures [Lee Seok-woo's China 24]

[Financial News] As China's stock market recorded its worst monthly decline in a decade since 2016 amid a fall in the CSI 300, the People's Bank of China (PBC), the National Financial Regulatory Administration (NFRA), the China Securities Regulatory Commission (CSRC), and senior officials at major banks began devising emergency measures to stabilize the market.
According to local media including Cailian Press on the 2nd, PBC officials and Chinese financial authorities held an emergency meeting that day and agreed to implement measures including expanding the use of a stock market fund worth 800 billion yuan (161.784 trillion won), easing relending conditions for share buybacks and increases in shareholdings, boosting stock purchases by financial institutions and state-owned enterprises, and increasing liquidity through new monetary policy operations.
The CSRC also decided to tighten restrictions, including suspending securities lending, cracking down strictly on unofficial short selling, and regulating short-term trading.
The relending program is a system in which the central bank provides low-interest funds to commercial banks and supports the banks in lending those funds to companies for share buybacks or to major shareholders to increase their stakes. It is intended to ease downward pressure on the market by increasing the supply of funds for stock purchases.
They aim to stabilize the plunging stock market and prevent it from falling further, while keeping risks from spreading across financial markets, including the bond market and the banking, insurance, and fund sectors.
The PBC plans to increase liquidity, while state-owned financial institutions and public enterprises will expand their stock purchases. Listed companies will also buy back their own shares to ease selling pressure.
The CSI 300, an index focused on large-cap mainland Chinese stocks, plunged 8.5% in October and entered bear-market territory. On a weekly basis, it fell for 12 consecutive weeks, losing 15% and setting a record for the longest losing streak in its history.
The stock market's weakness stems from a slowdown in domestic demand and uncertainty over the performance of AI-related companies. As doubts grew over whether increased AI investment would translate into actual corporate profits, selling pressure mounted, particularly on technology stocks.
China's recently released official manufacturing Purchasing Managers' Index (PMI) and non-manufacturing PMI for October both fell below 50, signaling economic contraction. They also indicated that economic activity was slowing simultaneously in manufacturing, services, and other sectors.
Markets are watching to see whether Chinese authorities will introduce further, more fundamental measures to restore investor confidence, going beyond simply providing liquidity. 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 government bonds, from that day through the 6th.
[email protected] Lee Seok-woo, International Affairs Correspondent
[email protected] Lee Seok-woo, International Affairs Specialist Reporter