China’s State Council Calls for Greater Stock Market Stability as Manufacturing Contracts
Key Facts
China’s State Council called for improved mechanisms to stabilize the capital market and strengthen its internal stability at an executive meeting chaired by Premier Li Qiang on November 6. The call put the stock market among the meeting’s priorities, alongside broader economic issues. According to the meeting’s official account, the measures included boosting confidence and accelerating progress on major projects and infrastructure networks. The council also called for better coordination between fiscal and monetary policies to support domestic demand. The meeting statement did not announce a new stimulus package or specific instructions on share buybacks.
The call for market stability coincided with official data showing a decline in manufacturing activity in October. The National Bureau of Statistics said the official manufacturing purchasing managers’ index stood at 49.3 points, down 0.8 percentage points from September. A reading below 50 indicates contraction, while the production index fell to 49.8 points, down 1.9 percentage points. The new orders index also dropped to 49.4 points, down 1.1 percentage points from the previous month. These figures are from the official survey, not the private-sector RatingDog index.
Official non-manufacturing activity indicators also showed weakness, with the activity index at 49.7 points in October, down 0.5 percentage points from the previous month. The services sector recorded 50.0 points, down 0.2 percentage points, leaving it at the boundary between expansion and contraction. The construction sector fell to 48.0 points, down 2.3 percentage points. The composite output index dropped to 49.7 points, down one percentage point from September. This reflects a broadening slowdown in official indicators beyond manufacturing.
By contrast, the private RatingDog survey showed services activity remaining above the expansion threshold, though at a slower pace. Reuters reported that the general services index fell to 50.8 points in October from 51.6 points in September, its weakest reading since July. The index remained above the 50-point level that separates growth from contraction. Reuters said services companies faced fierce competition and rising costs as confidence weakened. Input prices also rose at their fastest pace in five months, driven by higher costs for materials, fuel and wages.
The official call came as Chinese stocks remained under pressure this year. Reuters reported that the CSI 300 had fallen 11% from the start of 2026 through November 4, after posting its biggest monthly decline in a decade in October, led by AI stocks. In a move separate from the State Council meeting, the People’s Bank of China said banks had applied for more than 200 billion yuan in relending quotas to fund share purchases during the week ended November 4. The bank also cut the relending rate by 0.25 percentage points to 1%, effective November 4. Chinese stocks jumped more than 2% that day, their best session in seven months, with investors partly attributing the move to the central bank’s announcement.
The central bank had announced on November 2 that it was turning its relending facility for share purchases from a temporary arrangement into a permanent mechanism. The facility allows banks to borrow from the central bank before lending to listed companies and major shareholders to buy shares. The one-year loan can be extended at maturity. The move provides a continuing framework for financing linked to share purchases, while the State Council’s call at a later meeting was framed generally as improving market-stability mechanisms. In January 2025, the government said more than 300 listed companies had announced plans to use bank loans for share buybacks and stake increases, and that companies with a market capitalization of more than 10 billion yuan accounted for more than 40% of the total.
Chinese financial authorities had previously announced a plan in January 2025 to expand the role of long-term funds in the market and encouraged listed companies to increase share buybacks and distribute dividends several times a year. But a Reuters report on November 3 said the benchmark index was down 13% during 2026 and argued that making cheaper buyback financing permanent would not remove the difficulty of reviving asset prices. The report said the financing’s impact could emerge later, while earnings needed to improve. Alongside the market issue, the November 6 meeting called for faster progress on major projects and six infrastructure networks covering water, energy, computing, communications, urban underground tunnels and logistics. It also called for a study of next year’s economic priorities and stronger policy coordination across years.