Beijing Unleashes Policy Barrage to Halt Stock Market Slide After Worst Monthly Rout in a Decade

Chinese authorities launched a coordinated package of measures on Monday to stabilise the country's ailing stock market, including fresh liquidity injections, a cut to borrowing costs for share buybacks, and an easing of curbs on leveraged trading, after the benchmark CSI 300 Index suffered its steepest monthly loss since 2016.

The actions came after the People's Bank of China (PBOC), the National Financial Regulatory Administration and the China Securities Regulatory Commission (CSRC) held a joint meeting in Beijing on Monday to discuss the use of policy tools to support the capital market, signalling a determination to defend equities after October's bruising sell-off rattled investor confidence.

The Sell-Off

The CSI 300 Index, which tracks the largest companies listed in Shanghai and Shenzhen, fell 8.5% in October—its biggest monthly loss in more than a decade—and closed near a one-year low . Over the past 12 weeks, the gauge has lost 15%, marking its longest losing streak on record . The tech-heavy STAR 50 index on Shanghai's exchange slumped 5.5% in the final week of October alone, as a global selloff in artificial intelligence stocks reignited concerns about the returns on heavy AI spending .

The rout has been driven by a confluence of factors: fading expectations for large-scale stimulus after third-quarter GDP data proved more resilient than feared, weak corporate earnings in consumer-facing sectors, and a global repricing of AI-related technology assets . The CSI 300 slipped into bear-market territory in late October, down more than 20% from its June peak, its first bear market since the pandemic-driven selloff of 2020 .

The Policy Response

At the centre of Monday's measures is the PBOC's announcement that it will conduct the third operation of its Securities, Funds and Insurance Companies Swap Facility (SFISF) on Tuesday. The facility, introduced in October 2024, allows eligible financial institutions to exchange assets such as bonds and stock exchange-traded funds for highly liquid central bank instruments, enhancing their capacity to buy equities .

A total of 31 securities and fund companies have submitted applications for the facility, with requested amounts exceeding 100 billion yuan (approximately US$14.9 billion) . The PBOC said it would expand the number of participating institutions, appropriately lower swap fees, and optimise collateral and operational arrangements .

Separately, the relending facility for share buybacks and shareholding increases—previously a temporary arrangement—will become a long-term institutional mechanism. Its relending rate will be cut from 1.25% to 1%, and financial institutions will be encouraged to expand lending under the programme . To date, loans for share buybacks and stake increases have reached approximately 440 billion yuan in signed agreements, with more than 280 billion yuan already disbursed .

The CSRC, for its part, said it would urge listed companies that have disclosed repurchase plans to accelerate implementation, and would expand the scope of the relending facility. In the first 10 months of 2026, 645 listed companies on the Shanghai and Shenzhen exchanges disclosed 700 share repurchase plans totaling 237.7 billion yuan, with both planned and actual repurchase amounts hitting record highs .

Market Context

The rescue effort follows months of piecemeal interventions that had failed to restore investor confidence. State-backed funds—the so-called "national team"—had already stepped up purchases in October, with exchange-traded funds favoured by state-linked investors seeing net inflows of 46 billion yuan on one day alone, the most since April 2025 . Yet those efforts did little to stem the slide.

Analysts have cautioned that state buying alone may not be sufficient to engineer a sustained recovery. "Cheapness alone is not the catalyst," Jade Fu, head of global multi-asset portfolio management for Asia-Pacific at UBS Asset Management, said in October. "We also need to assess growth, investor behaviour, momentum—and I think these are quite challenging right now" .

The broader economic backdrop remains difficult. China continues to grapple with sluggish domestic consumption, a prolonged property-sector debt crisis, and excess industrial capacity that has squeezed corporate margins . The AI-driven selloff that began in late October added a new layer of pressure, as investors questioned whether the massive capital expenditure pouring into artificial intelligence infrastructure would ever generate adequate returns .

What's Next

The joint statement from the three regulators emphasised that policy support would continue, with a focus on strengthening market resilience and boosting confidence. The PBOC said it would "conduct SFISF operations in a timely manner" and work with the CSRC to guide market participants in using the two key policy tools .

Whether the measures will be enough to put a floor under the market remains uncertain. Chinese shares had already edged higher on Monday in anticipation of supportive policies, suggesting investors are clinging to hopes that the latest round of intervention may prove more effective than previous efforts . But with global volatility, external uncertainties, and domestic structural headwinds still weighing on sentiment, the road to a durable recovery is likely to be protracted.