China's central bank's lending quota grows by 300 bln yuan to support small businesses

The People's Bank of China raised the quota of special central bank lending by 300 billion yuan (US$46.44 billion) to provide stronger support for micro, small and medium-sized enterprises in difficulty.

The funds released will be channeled to eligible locally incorporated banks at preferential interest rates over the next four months. In turn, this will encourage the banks to issue more loans to micro and small businesses at rates around 5.5 percent on average, thus pushing down the financing costs of MSBs, the central bank said in a statement.

The 300-billion yuan central bank lending will be given in a reimbursement approach. The locally incorporated banks issue loans to MSBs and self-employed businesses before applying for the equivalent amount of this special central bank lending. Thus the PBOC's lending policy will be targeted, providing direct support.

Central bank lending in support of MSMEs, such as with this special monetary tool designed to support financial institutions to issue MSB loans, has yielded positive results.