China Deploys State Funds and Rate Cuts to Stabilize Stocks

The Chinese government has intensified efforts to defend its domestic stock market through a combination of state-backed fund purchases and corporate buybacks. On Tuesday, a basket of nine exchange-traded funds favored by the state's national team of investors received 76.7 billion yuan in inflows, marking the second-largest surge on record.

To sustain this momentum, the People's Bank of China cut the rate on its relending facility from 1.25% to 1% and made the program permanent. This move provides low-cost funding for companies to increase their stakes or execute share buybacks. In response, several firms proposed significant capital returns to bolster investor confidence. CXMT Corp. proposed buybacks between 2.5 billion and 5 billion yuan, while Suzhou Dongshan Precision Manufacturing Co. planned to return at least 1 billion yuan to investors in 2026 via dividends and buybacks.

Other mainland-listed companies, including Ningbo Joyson Electronic Corporation, Universal Scientific Industrial (Shanghai), and Hwatsing Technology, also disclosed new buyback plans. While the tech-heavy Star 50 Index stabilized on Wednesday, some portfolio managers cautioned that corporate buybacks only provide a temporary floor and that long-term stability is necessary to attract retail investors.