The Chinese government agency that’s been propping up the equities market by buying stocks needs more ammunition.
The China Securities Finance (CSF) wants an additional 2 trillion yuan ($322 billion) on top of the 3 trillion yuan the government has already made available, unidentified sources told Bloomberg on Thursday. The 5 trillion yuan is not a final number.
In the wake of this summer’s stock market crash, in which the Shanghai Stock Exchange Composite Index fell 32% and wiped out about $3.4 trillion of market value, China’s central bank has been giving funds to the CSF as a way to stabilize the market.
The CSF has been using the 3 trillion yuan of funding to provide liquidity to brokers to encourage them to buy stocks and mutual funds.
The agency is seeking to borrow money for three to 12 months and at rates of up to 4.4%, Bloomberg reported, citing sources with knowledge of the agency’s plans.
Free market types may regard this as more meddling government meddling in China’s stock crisis. Asia Unhedged has another view: It may help to further stabilize the market after a series of government missteps.