Chinese support in stock markets: $15 billion swap mechanism begins

The People's Bank of China (PBoC) announced that it will launch a clearing instrument to increase liquidity for investments following the decline in stock markets.

According to the statement made by the PBoC, with the clearing instrument, which is expected to have a volume of 100 billion yuan (about 15 billion dollars), securities and asset management companies will be able to exchange government bonds and treasury bills, corporate bonds, stocks and exchange funds as collateral to be used for investment in the stock markets.

The swap mechanism will allow institutional investors to exchange less liquid assets for more liquid assets, provided that they invest in the stock markets.

So far, 31 financial institutions have applied for the clearing instrument, which aims to increase liquidity and transaction volume in stock markets.

The one-year maturity clearing instrument will become operational as of tomorrow.

The clearing mechanism, which the Central Bank first launched in 2024, was previously used for two rounds of financing.