The People's Bank of China (Central Bank) today announced the launch of a JPY500 billion (US$70.6 billion) lending program to support China's capital markets. This will allow financial institutions such as securities firms, mutual funds and insurance companies to use their liquidity to buy stocks using their existing assets as collateral.
Participants in the swap program will be able to obtain liquid assets such as Treasury bonds and central bank bills, using assets such as bonds, equity #ETF funds and holdings of the CSI300 index as collateral.
September 24, Governor Pan Gongsheng said the program could be expanded with additional funding if its initial implementation proves successful. Governor Pan said that another 500 billion is being considered, which could increase the total liquidity to more than 1 trillion.
This move is in response to the prolonged decline in China's stock market. China's central bank hopes to bolster investor confidence amid the country's worsening economic problems.
the plan was first announced in late September, after the Chinese central bank announced a series of monetary easing measures. The central bank announced it would lower the required reserve ratio by 0.5%, from 7% to 6.5%, and cut the seven-day reverse repo rate from 1.7% to 1.5%.
After the initial announcement of the scheme and measures, market sentiment reacted positively and Chinese stock indices rose significantly. The monetary stimulus also boosted stock markets in the US and Europe.
the #cryptocurrency market, #bitcoin broke out of its downtrend following the Chinese stimulus package and the US Federal Reserve's interest rate cut. However, earlier this week, bitcoin retreated after a recent briefing on the lack of new stimulus from China.
Fears over the Middle East conflict and profit taking also contributed to the market's decline. Analysts warn that China's latest stimulus package may not maintain momentum compared to previous cycles. However, once China officially announces its plans, bitcoin is expected to rally, as historically such measures have boosted the bitcoin price by more than 100%.
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