China's new 500 billion yuan swap facility to bolster capital market: experts

China's central bank on Thursday unveiled a new swap facility to bolster the growth of the country's capital markets, a strategic move which aims to ensure the steady development of China's financial landscape in the long term, according to industry experts.

People's Bank of China announced that it has decided to set up Securities, Funds and Insurance companies Swap Facility (SFISF), with the initial scale of 500 billion yuan (about 71 billion U.S. dollars).

The SFISF will allow eligible securities, funds and insurance companies to use their assets including bonds, stock ETFs and holdings in constituents of the CSI 300 Index as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills, said a statement.

Industry experts anticipate the newly-launched swap facility will inject significant additional funds into the capital market and reduce risks for non-bank entities amid market downturns.

"This greatly enhances the stock holding capacity of securities, funds, and insurance companies, and their ability to acquire funds. Especially when the market is undervalued, these non-bank entities can easily tap into market liquidity using this tool to strengthen their investments in quality assets so as to ensure market stability," said Xu Fei, an analyst of Wanlian Securities, a state-owned securities company.

Sources close to the central bank revealed that the swap facility has a maturity period of up to one year, with provisions for extension upon maturity.

Industry experts further noted the new monetary policy tool applies a "bonds-for-bonds" principle, which does not expand the scale of the base currency, and is not engaged in quantitative easing.

Furthermore, the swap facility enables non-bank entities to exchange less liquid assets for government bonds or central bank bills, making it easier for repurchase or financing sales in the market.

"The swap facility operates on a 'bonds-for-bonds' model, meaning the central bank does not directly inject funds, thereby avoiding an increase in base currency issuance and quantitative easing. While not involving base currency injections, experiences from the global financial crisis underscores the pivotal role of similar facilities, such as the Federal Reserve's Term Securities Lending Facility (TSLF), in swiftly stabilizing financial markets," said Wen Bin, chief economist at Minsheng Bank.

Starting Thursday, applications from eligible securities, funds and insurance companies will be accepted.

China's new 500 billion yuan swap facility to bolster capital market: experts

China and the European Union (EU) have agreed that it is necessary to provide general guidance on price undertakings for Chinese exporters of passenger battery electric vehicles to the EU, China's commerce ministry said on Monday.

The move aims to address relevant concerns in a more practical, targeted, and consistent manner with World Trade Organization (WTO) rules, according to the Ministry of Commerce in a statement.

Accordingly, the European Commission will issue a Guidance Document on Submission of Price Undertaking Offers. In the document, the EU confirms that it will assess each undertaking application under the same legal criteria, in accordance with the principle of non-discrimination and relevant WTO rules, in an objective and fair manner.

The progress fully reflects the spirit of dialogue and the outcomes of consultations between China and the EU. It shows that both China and the EU have the ability and willingness to properly resolve differences through dialogue and consultation within the framework of WTO rules, thereby maintaining the stability of automotive industrial and supply chains in China, the EU, and the whole world. This is conducive not only to ensuring the healthy development of China-EU economic and trade relations, but also to safeguarding the rules-based international trade order, the statement said.

On the same day, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) also issued a statement welcoming the positive outcome of the consultations.

The CCCME noted that eligible Chinese EV makers may now submit price undertaking applications in accordance with the EU's guidance, and the European Commission has pledged to review all applications objectively, fairly, and under uniform standards.

The proper settlement of this case meets the shared expectations of industries along the EV supply chain in both China and Europe. It will help ensure the security and stability of related industrial and supply chains and safeguard the broader China-EU economic and trade relationship, the CCCME said.

The chamber expressed appreciation for the substantial efforts made by China's Ministry of Commerce in defending the interests of the domestic industry. It also pledged to encourage and support relevant Chinese enterprises in making full use of the consultation outcomes to protect their interests in exporting to the EU and promote healthy cooperation between the industries of both sides.

China, EU agree on price undertaking guidance for Chinese electric vehicle exporters: commerce ministry