China has created what amounts to a state-run margin trader with $483 billion of firepower, its latest effort to end a stock-market rout that threatens to drag down economic growth and erode confidence in President Xi Jinping’s government.

China Securities Finance Corp. can access as much as 3 trillion yuan of borrowed funds from sources including the central bank and commercial lenders, according to people familiar with the matter. The money may be used to buy shares and provide liquidity to brokerages, the people said, asking not to be named because the information wasn’t public.

While it’s unclear how much CSF will ultimately deploy into China’s $6.6 trillion equity market, the financing is up to 25 times bigger than the support fund started by Chinese brokerages earlier this month. That’s probably enough to restore confidence among China’s 90 million individual investors, says Bocom International Holdings Co. The Shanghai Composite Index jumped 3.5 percent on Friday, capping a two-week rally that’s turned it into one of the world’s best-performing equity gauges.

“It doesn’t have to use up all the money, as long as it can make the rest of the market believe that it has enough ammunition,” said Hao Hong, a China strategist at Bocom International in Hong Kong. “It is a game of chicken. For now, it seems to be working.”

David Fuller's view

China is seldom out of the news.  That is no surprise because it has the world’s largest population; its command economy is second only to the USA in terms of size, and has been growing at a much faster rate over the last 30 years. 

Many Western commentators are extremely bearish of China.  They say the policies are crazy and that it is a disaster waiting to happen.  References to 1929 abound.  Could they be right?

Follow the money.  It is one of the oldest rules in the markets.  In other words, do not fight the China Securities Finance Corporation.  If China’s President Xi Jinping wants them to buy in support of the market, there will be no other player of remotely similar size.  

Check these daily charts: Shanghai A-Shares, Hong Kong Hang Seng and HK’s China Enterprises (H-Shares).  They had climactic selloffs and now show the early stages of recovery.  CSF has been instructed to buy.  Provided the recent lows hold, and they should, I would give the upside the benefit of the doubt. 

Will China’s economy grow sufficiently to sustain higher levels?  People in many other stock markets are asking the same question.  My view - probably, because accommodative monetary policies eventually help GDP growth.  Meanwhile, the two Hong Kong indices above have some of the most competitive valuations available today.