China's central bank cut the interest rate on its stock buyback relending program to 1% from 1.25% and made the facility permanent, after a Monday meeting with the securities and banking regulators on how to steady a slumping A-share market. Investors were not won over: the Shanghai Composite Index was down about 1.2% at near 3,595 in Tuesday afternoon trading, according to Trading Economics, erasing most of Monday's gain.

The People's Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission said in a statement on the evening of Nov. 2 that they would keep strengthening policy support and push financial institutions to make full use of the two market-support tools first launched in October 2024. For fund managers in Hong Kong, Singapore and across Asia who hold mainland shares directly or through Stock Connect, the question is whether cheaper credit for buybacks can put a floor under a market whose CSI 300 benchmark just had its steepest monthly drop since early 2016.

PBOC and CSRC Widen Buyback Loans and Swap Facility

The statement covered two programs. The first is a relending line that lets banks lend to listed companies and their major shareholders so they can buy back or add to holdings of their own shares. The central bank said that line would change from a temporary arrangement to a long-term, institutional one, and that its relending rate would drop by a quarter point to 1%. Banks are expected to price loans at a reasonable margin above that rate and to increase lending.

According to the regulators, companies and shareholders have signed about 440 billion yuan of such loans since the program began, and more than 280 billion yuan has been drawn.

The second tool is a swap facility for securities firms, fund managers and insurers, which lets them exchange assets for more liquid ones to fund stock purchases. It has been rolled over several times and has 105 billion yuan outstanding, the statement said. The PBOC said it would run new swap operations when appropriate, admit more institutions, lower swap fees and make collateral rules more flexible.

Deputy central bank governor Zou Lan, NFRA deputy head Cong Lin and CSRC vice chairman Liu Haoling spoke at the meetings, which drew 23 securities and fund firms and 26 banks. Representatives of China International Capital Corp., Guotai Haitong Securities, CITIC Securities, E Fund Management, Industrial and Commercial Bank of China, China Construction Bank, China CITIC Bank and Industrial Bank addressed the sessions, according to the PBOC. Officials from the State-owned Assets Supervision and Administration Commission also attended.

The meetings had been flagged over the weekend. Mainland outlet Cailian reported on Sunday that the three regulators would meet major banks, and the 21st Century Business Herald said some brokers and funds had received meeting notices, China Money Network reported.

Shanghai Composite Gives Back Monday's Rebound

The reports alone were enough to lift prices at the start of the week. The Shanghai Composite rose 1.08% to 3,638 on Monday and the Shenzhen Component Index climbed 1.63% to 11,010.7, Trading Economics data showed. Brokerages led the move, with CITIC Securities up 5.31% and China Merchants Securities up 5.22%. The tech-heavy STAR 50 index rose more than 3% and the CSI 300 gained as much as 1.3% during the session, China Money Network reported.

Tuesday's details failed to extend the bounce. By early afternoon, with the market still open, the Shanghai Composite was down about 1.2% at roughly 3,595, while the Shenzhen Component had slipped 0.2% to 10,998, Trading Economics said. AI hardware and printed-circuit-board makers were among the biggest losers, including Zhongji Innolight, down 7.3%, and Shennan Circuit, down 4.8%. The CSI 300 was also lower and trading below the 4,000 mark it had regained on Monday, when it closed at 4,016.92. Investing.com put the midday declines at 0.8% for the Shanghai Composite and 0.2% for the CSI 300, with Hong Kong's Hang Seng Index up 0.5%.

The backdrop is a sharp October sell-off. The Shanghai Composite lost 6.33% last month and closed at 3,599.00 on Oct. 30, its first finish below 3,600 this year, The Standard reported. The Shenzhen Component dropped 15.94% over the month and the STAR 50 lost 4.66% on the final day alone. The CSI 300 had its steepest monthly decline since early 2016, driven by a global retreat from artificial-intelligence stocks. Weak data added to the pressure: the official manufacturing PMI fell to 49.3 in October, signaling contraction.

What Investors Watch Next

The policy steps change the cost and duration of support rather than its size. A permanent buyback line at 1% gives listed companies, which regulators want to manage their market value more actively, a cheaper and longer-lasting source of funds. Whether they draw on it faster than the roughly 280 billion yuan disbursed over two years is the measurable test.

The swap facility matters more for daily flows, because it lets brokers, funds and insurers buy shares with borrowed liquidity. The PBOC announced a 100 billion yuan swap operation for Nov. 3, and 31 firms applied, Reuters reported via The Standard. Separately, it said on Tuesday that it would raise the foreign-exchange deposit reserve ratio for financial institutions to 6% from 4%, effective Nov. 15, according to Investing.com.

For the market, the nearer marker is whether the Shanghai Composite can hold above the 3,599 low it set on Oct. 30.