Bank loans for buybacks and stake increases are the tool under review, so a larger quota or cheaper funding would channel more credit to listed companies and big shareholders.
China’s central bank and two financial regulators are meeting banks, securities firms and fund managers on Monday, November 2, to look at how the tools they built to prop up the stock market are being used. The meetings follow a record 12th straight weekly decline in the CSI 300 index of major Shanghai and Shenzhen shares, which fell 8.5% in October, its worst month in more than a decade, according to investingLive. Chinese financial media reported the meetings on Sunday, citing industry sources.
Two sessions are planned, The Paper reported. In one, the People’s Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC) will meet some securities companies and fund companies to study how to encourage use of the capital-market support tools. In the other, the PBOC, the National Financial Regulatory Administration (NFRA) and the CSRC will meet banks to study improving the relending program for share buybacks and stake increases.
Neither the central bank nor the regulators had confirmed the agenda or announced any measures by Sunday evening, investingLive noted. Measures announced last month have not stopped the losses, as investors weigh a weak domestic economy against doubts about AI-related earnings.
The selloff has hit AI and chip shares hardest
The decline has been steepest in the stocks that led China’s AI rally. The STAR50 index of AI and semiconductor leaders fell 40% in less than four months, wiping out about US$480 billion in market value, Reuters reported on October 26. China’s broad blue-chip index was then down about 20% from its June highs, ending a rally that had run for two years.
AI stocks account for 42% of China’s market capitalization and 57% of turnover across mainland A-shares and Hong Kong H-shares, according to Goldman Sachs figures cited by Reuters. GPU makers MetaX and Moore Threads, which soared on their market debuts last year, have each halved since July, and robot maker Unitree has halved since it began trading in August. The STAR50 traded at about 100 times trailing earnings, down from nearly 250 at its peak, compared with about 30 for the Nasdaq 100.
The weakness reaches beyond markets. Official purchasing managers’ indexes released on Saturday showed both manufacturing, at 49.3, and non-manufacturing, at 49.7, back below the 50 line that separates contraction from expansion, investingLive reported. EastFrontier reported on October 23 that the CSI 300 had entered a bear market as the AI selloff deepened.
Banks lend for buybacks, and the central bank refinances them
The banks’ meeting concerns the Central Bank Lending Facility for Share Buybacks and Shareholding Increases, which the PBOC set up with the NFRA and CSRC on October 18, 2024. According to the PBOC, the facility started with a RMB300 billion quota. Twenty-one national financial institutions, including policy banks, state-owned commercial banks, the Postal Savings Bank of China and joint-stock banks, lend to listed companies and their major shareholders for buybacks and stake increases. The PBOC then refinances 100% of eligible loan principal at an annual rate of 1.75%, and the loans to companies should generally cost no more than 2.25%.
The money must stay within a closed loop: it can only be used to buy the company’s own shares. That makes the tool a way to steer cheap credit into equities through companies and their owners, rather than a direct purchase of stocks by the state. A second tool, a swap facility for securities, fund and insurance companies, launched the same day. In May 2025 the PBOC merged the swap facility’s RMB500 billion quota with the relending program’s RMB300 billion so the two could be used together more flexibly, The Paper reported.
What the regulators want to change is not yet known. "Optimizing" the relending program could mean cheaper funding, wider eligibility or simpler procedures, but none of the reports on the meetings specified which, and the facility’s current usage was not disclosed.
Markets will judge the readout against the scale of the losses
The first test is whether the meetings produce a public statement with concrete changes. The CSRC’s chairman, Wu Qing, met market participants earlier in October to hear suggestions on improving capital markets, Reuters reported, but the slide continued. Fund managers quoted by Reuters described the earlier AI boom as speculative, and one predicted that chipmakers and AI suppliers would end up in a price war.
The stakes go beyond index levels: Reuters described the slump as a setback for Beijing’s efforts to encourage savers to put money into stocks to fund the AI boom. A larger quota or a lower relending rate would be the clearest signal of a stronger response. Watch the PBOC and CSRC websites for a readout after Monday’s meetings, and the next exchange filings for companies announcing buyback loans.