The People's Bank of China announced on Nov 4 that it will cut the relending rate for stock buybacks and stake increases by 0.25 percentage points to 1%, effective Nov 4, 2026. It is a direct monetary policy operation targeting the capital market, designed to support stock buybacks and stake increases by lowering the funding costs for financial institutions that extend such loans to listed companies and major shareholders.
Key figures
| Item | Details |
|---|---|
| Timing of adjustment | Nov 4, 2026 |
| Size of adjustment | Cut of 0.25 percentage points |
| Rate after adjustment | 1% |
| Facility established | October 2024 |
| Initial quota | 300 billion yuan |
| Initial rate | 1.75% |
| First cut | Lowered to 1.5% in May 2025 |
| Nature of this adjustment | Second rate cut since the facility was created |
The relending facility for stock buybacks and stake increases is a dedicated monetary policy tool set up by the PBOC in October 2024. It provides relending funds to commercial banks to encourage them to lend to eligible listed companies and shareholders for stock buybacks and stake increases.
On market reaction, major A-share indices rose markedly on the afternoon of Nov 4. According to kaopunews, the STAR Composite Index jumped more than 9.6% on the day, with market sentiment heating up significantly. The PBOC's rate cut was announced in the morning, and the market widely viewed it as a positive factor. It should be noted that the sharp rally may have been driven by multiple factors, including policy tailwinds, expectations of looser liquidity and a technical rebound.
Analysis
The PBOC's decision to cut the rate on Nov 4 coincided with the sharp rally in A-shares that day. Market analysts see the move as a policy signal to safeguard capital market stability and shore up investor confidence.
"The PBOC's cut in the relending rate for stock buybacks and stake increases directly lowers the financing costs for listed companies, helps raise industrial capital's willingness to increase holdings and provides positive support for market liquidity." — according to market analysts
The rate cut is expected to lower the cost of buyback and stake-increase loans for listed companies and major shareholders, further encouraging industrial capital to enter the market. For banks, a lower relending rate helps boost their willingness to extend such loans. The policy also dovetails with other recent market-stabilizing measures and may have a sustained impact on the capital market's liquidity environment. Investors should take a rational view of the impact of any single policy.
What to watch
- How commercial banks adjust the pricing and pace of disbursement for stock buyback and stake-increase loans;
- Changes in actual loan demand from listed companies and shareholders;
- Whether the PBOC further adjusts the rates of other structural monetary policy tools;
- Subsequent A-share performance and liquidity conditions.