China to restrict securities refinancing

China Securities Regulation Commission (CSRC) would implement measures to restrict securities refinancing, in which brokerages borrow shares and lend them to clients for short selling, Reuters reported on Tuesday.

The regulator plans to ban securities lending to investors who sell stocks on the same day they were purchased and intends to crack down on illegal arbitrage through short-selling.

These actions are part of ongoing efforts by the Chinese government to stabilise share prices in response to the recent decline caused by a struggling economy.

The recent measures were introduced just one day after the CSRC strongly warned against malicious short sellers, stating that they would face severe consequences such as financial losses and imprisonment if they broke the law.

CSRC added that recent efforts to curb short-selling have led to a 24 per cent drop in the securities lending business, to 63.7 billion yuan.

(1 usd = 7.11 yuan)