China to Discuss Improving Stock Buyback Financing as Manufacturing Contracts to 49.3

Key Facts

The People’s Bank of China is expected to meet with representatives of major banks, the National Financial Regulatory Administration and the China Securities Regulatory Commission on Monday to discuss improving lending facilities supporting share buybacks and increases in major shareholders’ stakes. The meeting comes as the official manufacturing Purchasing Managers’ Index returned to contraction in October, recording 49.3 points. The data showed a decline from 50.1 points in September, taking the reading below the 50-point threshold that separates contraction from expansion. The reading also came in below the Reuters poll forecast of 50.0 points. This puts discussions of market-support tools in the context of slowing industrial activity, alongside weaker production and orders indicators.

Weakness extended beyond the headline index: the manufacturing production index fell to 49.8 points in October, down 1.9 points from the previous month, while the new orders index declined to 49.4 points, a drop of 1.1 points. The new export orders index fell to 48.7 points from 50.0 in September, signaling contraction in this component after it had been at the expansion threshold. The production index also fell to 49.8 points from 51.7 points the previous month, according to data reported by the Associated Press. The chief statistician at the National Bureau of Statistics said the manufacturing decline was linked to some orders being brought forward ahead of the National Day holiday, as well as the complexity and changing nature of the international environment. These indicators provide detail on sources of pressure on factories, while the orders reading reflects weaker domestic and external demand during the month.

In the services sector, the business activity index recorded 50.0 points in October, at the threshold between expansion and contraction. But the business activity index for the non-manufacturing sector stood at 49.7 points, down 0.5 points from September, according to China’s National Bureau of Statistics. The difference between the two readings indicates that services held at the threshold, while the broader index for non-manufacturing activity remained below it. Across companies as a whole, the composite PMI output index fell to 49.7 points, down one point from the previous month. The bureau said the reading reflected a slowdown in overall business activity. The decline in October thus extended from manufacturing to the composite activity measure, even as the services index remained at 50.0 points.

The discussion of relending facilities for share buybacks is based on a program launched in October 2024 with an initial limit of 3000 billion yuan, an annual interest rate of 1.75%, and a term of one year that can be extended depending on conditions. In January 2025, the minimum required self-financing ratio was lowered to 10%, and the maximum loan term was extended to 3 years. The government said at the time that more than 300 listed companies had announced plans to use the loans. In May 2025, the program’s 300 billion yuan quota was combined with an initial 500 billion yuan swap facility under a joint quota of 800 billion yuan. Authorities said more than 500 listed companies and major shareholders had reported using the relending facility to buy back shares or increase their stakes. The total of two swap facility operations had also reached 105 billion yuan by then.

The steps follow a pledge by the securities regulator’s chairman on 19 October to give priority to market stability, monitor domestic and overseas markets, and strengthen risk assessments, policy-tool reserves and stability mechanisms. The CSI 300 had then recorded 10 consecutive weeks of declines since early August, nearing its lowest levels in more than a year. In the final trading session of October, the index closed at 3,985.50 points, down 1.39% over five days and 13.92% since the start of the year. CSRC Chairman Wu Qing warned that growing interconnectedness and volatility in stock, bond and currency markets were raising the risk of contagion across borders, markets and sectors, and urged vigilance. The scheduled meeting puts discussions on improving an existing financing tool alongside those market-stability concerns. Earlier EL7 coverage estimated that Chinese stocks had lost about 2.4 trillion dollars since their May peak, as the CSI 300 entered a bear market.