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Investing.com-- China's central bank has expressed support for sovereign wealth fund Central Huijin Investment to increase its holdings in stock market index funds, aiming to stabilize domestic markets shaken by escalating trade tensions with the U.S.
The People's Bank of China (PBOC) said on Tuesday that it would provide re-lending support to Central Huijin, a unit of China Investment Corporation, if necessary, to ensure the smooth operation of the capital market.
This move follows Central Huijin's intervention on Monday, when the fund increased its equity holdings through exchange-traded funds (ETFs) to counter a sharp decline in the Shanghai Composite index, which had plunged 7% amid fears of a deepening trade war.
In addition to Central Huijin's actions, several Chinese state-owned enterprises have announced plans to expand share purchases and conduct buybacks as part of broader efforts to bolster market confidence.
The PBOC's backing underscores Beijing's commitment to supporting the capital markets during periods of economic uncertainty, particularly as the U.S. imposes new tariffs on Chinese goods, prompting concerns over a potential global recession.