China eases stock buyback loan rules to boost financial market confidence

China has introduced new policy adjustments to ease stock buyback refinancing by lowering the borrower's own funds ratio to 10 percent and allowing pledges of other shares held by listed companies and major shareholders, so as to reduce the financial burden on borrowers.

Introduced by the People's Bank of China (PBOC), the country's central bank, on Oct 18, 2024, the stock buyback loan policy allows eligible financial institutions to offer loans to listed companies and their key shareholders for stock repurchase or stake increases.

By the end of December 2024, financial institutions had reached cooperation intentions with over 700 listed companies and major shareholders, with more than 200 publicly disclosing proposed loan ceilings exceeding 50 billion yuan (about 6.8 billion U.S. dollars).

Over 60 percent of the loans are designated for buybacks, with an average interest rate of around two percent.

Additionally, statistics indicate that the total upper limit for disclosed buyback plans across the market exceeded 250 billion yuan (about 34 billion U.S. dollars) by the end of 2024.

"The policy allows listed companies to use bank loans for share buybacks. Banks providing these loans can seek proportional refinancing support from the central bank. Increased holdings and reduced share supply can theoretically boost stock prices, enhance market confidence, and protect company valuation," said Tian Lihui, dean of the Institute of Finance and Development at Nankai University in north China's Tianjin Municipality.

In response to feedback from listed companies and major shareholders about their limited funds, financial authorities have adjusted the policy. The minimum self-funded ratio required for applying for stock buyback loans has been reduced to 10 percent, meaning financial institutions can now support up to 90 percent of the actual buyback amount instead of the previous 70 percent, lowering the entry threshold and easing the financial burden on borrowers.

Besides, the loan term has been extended to a maximum of three years.

"In simple terms, if a listed company wants to buy back 100 yuan (about 13.7 U.S. dollars) worth of stock, under the previous policy, it had to contribute 30 yuan (about 4.1 U.S. dollars), with the bank covering the remaining 70 yuan (about 9.6 U.S. dollars). Now, the company only needs to contribute 10 yuan (about 1.4 U.S. dollars), while the bank can cover 90 yuan (about 12.3 U.S. dollars). Additionally, the new policy extends the loan term to a maximum of three years. This gives companies more time to use the loan for stock buybacks without the pressure of repaying it in the short term," Tian explained.

Additionally, new risk control measures have been introduced. Listed companies and major shareholders can now pledge other stocks as collateral, while financial institutions have been granted discretion in setting loan conditions and collateral requirements.

The policy also encourages issuing these loans on a credit basis.

For banks that do not have third-party depository qualifications, the policy supports collaboration with agent banks to conduct business. The lending bank can transfer the loan funds to the relevant accounts through the agent bank, which will then be used to support listed companies and major shareholders in stock buybacks and shareholding increase.

China eases stock buyback loan rules to boost financial market confidence

The China-CELAC (Community of Latin American and Caribbean States) Forum is expected to bring new vitality to the global development and human civilization, said Colombian President Gustavo Petro in Beijing.

Petro, who delivered a keynote speech at the opening ceremony of the fourth ministerial meeting of the China-CELAC Forum on Wednesday, told China Media Group (CMG) in an interview, while giving a special mention of the importance of the forum as a platform to reshape multilateralism.

"This Forum, held here in China, comes at a pivotal moment in history. And that's precisely what makes it so significant. It is taking place at a time when multilateralism is in urgent need of reshaping. There are some powers who believe they can rule the world through intimidation and shows of force. But with China and Latin American and Caribbean (LAC) countries standing together, we must make them understand: history is full of hard lessons. Those who once flexed their military might did not prevail. They may have enjoyed momentary success in the past, but this time, history will not repeat itself," he said.

This year marks the 10th anniversary of the China-CELAC Forum's operation.

Chinese President Xi Jinping stated in his speech delivered at the opening ceremony of the fourth ministerial meeting of the China-CELAC Forum that under the careful cultivation of both sides over the past 10 years, the China-CELAC Forum has grown from a tender sapling into a towering tree.

Petro hailed the relations between China and LAC countries over the past decade, saying that the cooperation is expected to energize the global development and human civilization.

"Yes, exactly, a tree. A strong and thriving tree, with deep and well-developed roots firmly anchored in the earth. There's no doubt that over the past ten years, trade in physical goods between China and LAC countries has grown substantially. China is involved in building the Bogota metro project. China is also constructing a port in Peru, and many other large-scale infrastructure projects are being advanced through Chinese investment and engineering expertise. When we link the cultural and civilizational threads of China and LAC countries, it's as if we are nurturing a living tree, one that grows tall toward the sky and promises to bring new vitality to the human civilization," he said.

China-CELAC Forum brings new vitality to global development: Colombian president