Institute of Finance and Banking Proposes 2 Trillion Yuan Fund to Bolster China’s A-Share Market

Proposed Fund and Its Implications

The Institute of Finance and Banking advocates for the issuance of 2 trillion yuan (US$280 billion) in special bonds to create a stock market stabilization fund aimed at restoring confidence in China’s equity markets. This call comes amidst concerns of weakening consumer demand and economic slowdown in Beijing.

Boosting Market Stability

This stabilization fund is expected to enhance the inherent stability of the capital market which is crucial for steady economic growth. Recent statements from Pan Gongsheng, governor of the People’s Bank of China, have indicated that the government is actively exploring state-backed stabilization measures that could rapidly instill confidence among investors.

Response to Wild Swings

China’s stock market has experienced wild swings recently, influenced by extensive government stimulus policies such as rate cuts and incentives to boost consumption. Retail investors in the A-share market are particularly affected, and proposed measures may provide them a sense of security.

Long-term Strategies and Collaboration

Long-term investment from entities like insurance companies and social security funds will also be encouraged to support the A-share market. Effective coordination between the financial institutions and the central bank is deemed crucial, ensuring that liquidity reaches the stock market efficiently. However, gaps remain, particularly with the time lag between policy implementation and visible economic improvements.