The People's Bank of China announced today the establishment of a convenient interchange mechanism for securities, funds, and insurance companies, with an initial scale of 500 billion yuan, to support eligible securities, funds, and insurance companies in obtaining liquidity from the central bank through asset pledging. The scale may be expanded in the future depending on the situation.

According to internal sources cited by the media, the aforementioned interchange mechanism does not involve direct cash provision and will not expand the base money supply. According to the current People's Bank of China Law, the central bank is not allowed to directly lend to non-bank financial institutions. The interchange convenience for securities, funds, and insurance companies adopts a 'securities in exchange for securities' approach, which increases the financing capacity of non-bank financial institutions without directly providing funds to non-bank institutions, thus not expanding the base money supply.

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